Budget Divas

Maximizing Your Chances For Mortgage Approval - With Expert Guest Bradley Shinagawa

December 14, 2022 Jenn Trinidad Episode 48
Budget Divas
Maximizing Your Chances For Mortgage Approval - With Expert Guest Bradley Shinagawa
Show Notes Transcript

Ep# 48 Are you ready to become a homeowner in 2023?

In this episode, my guest is Brad Shinagawa of B&B Mortgage Solutions. This episode is filled with great tips on how to start planning for pre-approval, getting your credit right, and mindset solutions to get you in the right headspace to be able to take on a mortgage. 

Takeaways from the show: 

  • How to budget for the mortgage payment 
  • What you need to know to get pre-approved
  • Establishing a strong and honest relationship with your mortgage officer


Established in 2007, B&B Mortgage Solutions opened in the heart of the largest mortgage and real estate meltdown ever seen.  Through their local values and exceptional reputation, B&B was not only able to survive, but flourish.

Through the ever changing lending environment and the mortgage industry thriving again, B&B Mortgage has been repeatedly recognized as one of Hawaii’s top Mortgage companies.  That, largely due to them following their motto of treating every client as if, “was my aunty.”

Through listening to their clients’ needs and educating them on the lending process, the licensed professionals at B&B Mortgage will tailor the most suitable, and often times “Out of the Box,” financing structure.  So, whether buying your first home or refinancing your tenth home, The B & B Team will find the right loan for you through the variety of home loan products available to them.

To learn more, visit their website: https://www.bbmortgagehawaii.com/ 




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Jenn: Welcome, Brad to the Budget Diva Show. Tell us more about you and what you're all about.
 
 Brad: Hi, Jenn. Good morning. Thank you for having me. I think I've told a couple of people about today. I'm going to be on a podcast. I listened to so many podcasts before. This is the first one I'm being on, so I appreciate you having me on here.
 
 Just some real quick tidbits about myself. It might be relevant throughout my presentation. I was born and raised on the island of Kauai and went to high school there and then went off to Oregon for college at Oregon State University. Spent in total about 10 years in the Northwest.
 
 I enjoyed it, and I worked up there. I graduated with a fitness management degree, so I have nothing to do with finance. And got really into real estate and just personally invested in real estate up in Oregon. My good friend up there his name's Bobby Chow, we moved home together, got married around the same time, had kids around the same time.
 
 We opened B & B Mortgage. He was in finances, and he needed help. He was a few years in the industry, and he needed help getting set up for a while. We operated out of his house back in 2007 in this tiny little room. I'd go there in the morning, at seven, 8:00 AM in the morning. And I always joke around with him because he'd open the door just fresh out of bed and we just, we just go at it.
 
 We'd go into his little room. At the time he just moved home, so he was still living there I think for a little while. His parents were living there for a little bit, and it was kind of fun. And we just had a couple of computers, only one computer, and kind of just started to do mortgages.
 
 To me that's like the roots of everything. There are people that have a profession and then there's people that have a passion. And I just love everything to do with real estate. The strategic nature of getting ready to purchase a home or refinance a home. Anything to achieve your goals.
 
 And it captivates me.  I can talk for days about anything, and I love talking to people who are interested, who are curious and are, are wanting more information. It challenges me as well. I'm the first to say that I need to get right back to them and figure out different types of roadblocks that I had for the question that they've proposed to me.
 
 And by that, it helps me. Because our industry ego should be checked at the door. The second someone thinks that they know everything they get thrown a curve ball, they get thrown a pandemic, they get thrown guidelines that has to do with the pandemic, they get thrown. It's different self-employment situations.
 
 In Hawaii, we're challenged with so many different obstacles, including high cost, high living. It's not for the fainthearted, but I love this industry so much because it's constantly changing and the person who is excited about it and passionate about it truly it's not work.
 
 It's not work for me. So that's kind of where I'm coming from at this point in my chapter of my career.
 
 Jenn: I so appreciate you coming on the show today. Because it's such a relevant topic right now. I mean, every time I go to the grocery store, the prices have gone up again. I remember I put animal crackers in my online Target grocery cart.
 
 It was $7, and then the next day when I checked, it went up to $9. How did it go up $2 overnight? And everything across the board is just going up. Right? This is such a relevant topic because people are thinking - well at the rate of how inflation is going, and with the market being so volatile and there's no inventory, how am I supposed to buy a house in Hawaii or wherever you live currently?
 
 Brad: Yeah, I actually get the wonderful opportunity to teach a class at the University of Hawaii. My good friend he's a professor there and he has me come in maybe once a year to discuss the mortgage side of it. And I always start off the class with how home ownership can promote a great economy and society in general. I mean, that's how deep I take this because the, the fact of home ownership causes people to plan and nothing can go wrong when you have a bunch of people in your community planning for a certain goal, and home ownership is something that you need to plan for.
 
 It doesn't matter where you are necessarily. It just matters how much you need to plan. You need to figure out where you're at and how you can get into the situation that you want to be in. And going back to how I opened the class, it's statistically not very common for people to be able to own a home in their life.
 
 It's not that easy. We're a little north of 50%, so that's a good thing. More people can do it, maybe six out of 10. As we get into the higher end places like Hawaii, that obviously statistic kind of sometimes tends to drop. And what we need to do as people, as humans is really look for something that can create inspiration to purchase a home.
 
 And why that's so important is because you're not going to be so easily quick to throw all your money away and not save. You're not going to be so quick to do these sorts of things because it could affect your dream of home ownership. And if more people are thinking about that, then hopefully less people will be pulling society down as opposed to promoting it and that's when I start talking about. Some of the kids at are like, wait, I thought we came in for mortgages. You're going off on me mister about life. And I think that it is, that's where the passion comes from. And to your question on how can someone do this? It's just like anything.
 
 It's just like, how can you become a better basketball player? How can you learn to speak better? How can you learn to purchase a home? It's planning, it's practice, and there's no secret to it. There's a lot of courses out there attended some of them. I've gotten done research on some of them because I'm curious about them, and there's no secret, like they promise you.
 
 The secret to wealth is this. The secret to home ownership is this. There's no real secret here. To purchase a home is the ability to show the bank that you're worthy of them lending you money. And to do that, you need to show credit worthiness, whether it's. Whether it's a good down payment, whether it's savings, whether it's less debt, also being able to pay back debt.
 
  There's so much different facets in looking good to someone to allow them to lend you money. Then you can do it because there's time and with time, it equates to good things if you plan. So, the sooner that someone makes that decision that they want to be a homeowner is my best. It's never too late.
 
 But when should you get ready to buy a home was yesterday. You should always be thinking about that if that's your goal. If you're wanting to purchase your second home, it was yesterday that you needed to start planning. If you're wanting to refinance or get a home equity, Atlantic credit, yesterday was the day that you were supposed to start planning.
 
 So it's constantly working, if it's eating healthy, that's your goal. You don't want to say, okay, I'll start tomorrow. You start today and you tell yourself, man, I should have started yesterday. And that's how I feel about achievement of financial goals via real estate. So yes, Hawaii is expensive.
 
 It's one of the top three states in the country. Yes, we have a higher living cost of living. In most places around the world, it's just not an excuse though. If you want to do something like homeownership, you got to have started. You have to start planning yesterday, and that's, that's just my belief that anyone can do it.
 
 It's just how much are you committed to listening to the Budget Divas, or to myself to get yourself into a position where you can succeed. So good. Especially because you mentioned. You need to have started yesterday. So right now we're in the middle of the holiday season. I don't know, but maybe people are not thinking about their budgets, they're thinking about spending money or other factors that are going on right now.
 
 Jenn: But even if you were to just sit down today and say, what is my income? What is the money that actually shows up in my bank account every single month, and how much are my expenses? You would be better off doing that just right now, today, even if you didn't take any action other than that, than doing nothing at all, because at least you have the framework, the landscape of what it looks like as of today, so you can make those important decisions down the line. So I love that you said that you have to plan. Speak to the audience out there, if there's someone out there that's saying, I really want to buy a house in 2023. What are the first things that they have to do? And what does that plan look like?

Brad: Yeah, correct. And like you said, baseline, let's take a look at and I joke around and one of the networking groups that you and I are both in, I joke around with my members in there all the time that you got to be able to show your doctor everything.

You got to be able to talk to your doctor about anything. You cannot be ashamed of anything if you want improvement. And I think that's the biggest thing for people. They feel unworthy or not ready and they're embarrassed about so, because you kind of know if you're successful that you're doing the right things.

I think you kind of know that. So those are the people that aren't too afraid to come and bring all their stuff, the good and their bad. But when you are unsure or you're even positive that you cannot qualify for anything, and it's because of these embarrassing things that maybe a life decision has caused you, that's when things.

Become a, a psychological thing. Yeah. And so getting that baseline is everything. We got to figure out where you’re now. Everyone is qualified for something, everyone's qualified for something, but it probably is not what that person wants. And that's all we have to do. We just have to figure out the path of getting to that point.

And it's always interesting to me because there's conventional thinking. And I don't mean to be age discriminatory. But our parents, our grandparents, the older generation had one thing in mind, saving for a down payment. Hey grandpa, how can I buy a house? You need to save for a down payment.

Yes, they want you to go to school and get a good job and all that. Saving for that down payment, taking your Christmas money and putting it into a bank account because one day you're going to use that for a down payment. Realistically, in Hawaii. Down payment is very, very expensive. You need a lot of it. We were talking before we started the podcast though recently there's been movement where you can purchase a home with pretty minimal down payment.

You have to save. Don't get me wrong, it's just not insurmountable. That whole theory of 20% down to avoid mortgage insurance and we can talk about that later, is the right way. The only. That is gone. That's, that's 50 years removed at this point. So advice that comes to a lot of people are a little, is a little archaic because there is a lot of different banks out there that want to land in Hawaii, and that's a good thing.

So if you're looking to buy, Hawaii is not a place where banks shy away from, they're cracking down the door from North Carolina, from the east coast, they want to lend in Hawaii. So when you have a place that you live in, the greatest place on earth, banks are going to want to lend here. And how do they do that?

They're going to make it hopefully a little easier for people to borrow money and down payment is one of them a down payment relief is one of them. And there's a lot of programs. My business partner and I, we volunteer at a entity called Hawaii Home Ownership Center, and they are motivated to put people in homes the right way.

You have to go through classes. We've taught in these classes, and you have put forth the effort that they're putting forth for you. There's not much of a cost in it yet. They're expecting you to hold your end of the bargain, and that's the kind of stuff that that needs to occur as far as getting yourself ready for home ownership.

The information that's out there, Jen, is, is scary. It's scary because one, you can have a fear-mongering type of advice where it almost puts you in a downward spiral that that will never. It's too hard. The banks are evil. Bankers are greedy. And then you have the other types of information, a more warming direction where it's possible.

Yet we're not going to be light on you because we need to push you so that you can get yourself in position. A lot of these resources are free and a lot of them really don't come at much costs as as well, and that's what I think is cool. Hawaii is pushing for home ownership, and I think it's because we need it.

We're a community that is very tight-knit and we're losing people because for cheaper, greener pastures elsewhere. And we need to inspire people to have home ownership to create a better community here. So I think the best thing for people to do is to figure out their situation. Meet with someone like yourself or myself and have a conversation. You and I have a team set up so that you can have different advice coming in from different places, all with the same goal, helping the buyer achieve their goals. And a lot of it is free. A lot of it does not cost too much money. But if they're motivated, I'm motivated.

Jenn: So what I'm hearing is that someone who's just starting out might not be able to afford that beautiful three bedroom house with the white picket fence and the two car garage, and the really nice neighborhood with the good schools, but they might be able to afford something smaller to start off with and then move their way up.

Brad: Yeah, that's a great point. And that's, that's a great point. Expectation, managing of expectations. If you're getting into that beautiful place to start. You might be putting yourself in an unrealistic expectation.

So a certain zip code could be a dream and you could dream and try and get to those places. But the goal is just true home ownership, trying to get into something and putting your name to something that's really good. That you gotta just manage your expectations because the proper way to do something is like that.

You go into something that you can afford. And that's what we start with actually along with the baseline of, let's see where you. Is the biggest question that we say, what monthly payment can you afford? Because we can qualify you for whatever 900 or a million?

And if you can handle the monthly payment on it, then great. But if you can't handle the money payment on it, then why even ask someone, what am I qualified? The goal, the right question is, I can afford this amount. Am I qualified for it? And if not, what do I need to do to get there? That's the responsible way to buy.

Making sure that you can, you're approved for the amount that you can actually handle per month. That's really good advice. And I know you have mentioned in the past too that you've helped other people put their budgets together, put a plan together so that they can actually achieve home ownership. What does the timeline look like for someone in a situation where they're starting from scratch, but they don't know what they can afford?

They don't know what their budgeting what their budget is every single month. Yeah. So assuming they have employ. And maybe they're living at home. The way to practice this is just to mirror what it's like to to have a mortgage, and if they are getting paid on the 15th and 30th of every month, what we do is we try and set up a bank account.

So if they currently have auto deposit with their paychecks going into their Bank of Hawaii account every paycheck two times. What we do is we try and mirror what a mortgage would payment would look like on the first of every month. So for example, December 15th is coming up. December 30th is coming up.

We ask that client to put their paychecks into their standard account and come January 1st they set up account with Hawaii State Federal Credit Union, a totally separate bank account, and we have them auto deduct. Automatically send money to that account. So December 31st comes January 1st, rolls around if they feel that they can handle a $2,000 per month mortgage.

And automatically from December 31st, $2,000 gets sent out to Hawaii Federal Credit Union or Central, a different banking entity. And that acts like the mortgage payment and they need to. Based off their Bank of Hawaii account. It cannot live as if that Hawaii Federal Credit Union account is theirs.

It has to be thought of as gone. Obviously, they're going to be saving money, right? That's a bank account that is helping save money for them. They just need to practice though, by living their life based off of the Bank of Hawaii account. And if $2,000 a month is doable, then increase it every. About 10 to 20%, so about 200 to $400 per month.

Now it's going to go in addition and find that sweet spot, find that sweet spot that you can have fun. Your quality of life is not horrible, and you can see if that's the number. And if that's the number you end up at $2,400 per month, then that's where you work backwards. And we take your $2,400 a month and you can.

And we work backwards to see what sales price that equates to, right? And vice versa. If that amount is a little too heavy, just keep scaling it back till it's comfortable, and then once that's comfortable, that's the number that you're looking for. So it's a great way to practice. And if you are currently renting and you're rent, say, $2,000 and you can afford it, and you're like, I think I could do $3,000 a month. Same thing. You pay your rent for $2000, you set up that other account, and every single month when rent is due, you send out an extra thousand dollars to that account. So that way it mirrors what life looks like from Bank of Hawaii to have a $3,000 monthly obligation, $2000 to your landlord, $1000 goes to this Phantom Mortgage company that's helping you.

It's neat. I usually set up like a shared Google Drive with clients where we can do balance updates, we can see what they're spending. I think that's kind of like more on your area, but I like to see more of them putting the money in every single month and then seeing them increase it because they start changing their life. Because when home ownership is important, people will do it.

Jenn: Such great advice. I, I'm kind of laughing right now because let’s say rent is $2,000, right? Then I need to increase it by another thousand or $1500 and I have to manually walk that check to another bank or set it up. That's my target money and my Starbucks money, that really hurts. But this is a great point because if you're going to have a $3,500 mortgage and you're used to only paying $ 2000, what is your quality of life going to be like? So that's a great point that people need to think about that.

You're willing to give up $500 a month, say that you're saving for your annual trip money, right? Or are you willing to cut down on some of these expenses so that you can have that house or that property that you're really wanting to buy? So this is such a great point to practice that. And I didn’t think about that before meeting you. Why don't you just put away an extra $2000 and see what that feels like and if you can actually afford that mortgage payment or if you're going to come home from work every day, be like, oh my goodness, my house is not a blessing, my house is a curse because I'm giving up so much every single month.

Brad: Yeah. Discussions that I've had with couples especially, it's, it's, it's awesome. It's a team, you really solidify your marriage sometimes because it is a team effort to figure out, like you said, that's my target money or my Starbucks money, or Wow, we cannot, or should not be driving to the North Shore for the beach today because of gas. It's all those different things that just falls into place when you take it seriously. And I love it. I love it because the outcome is 10 times. It's just a beautiful thing when 12 months and 12 months is nothing. It's not long when you're doing this sort of thing, 12 months is not long. It happens so quickly and in the blink of an eye, people are ready to go. It's awesome. It's so rewarding for them. Yeah, it's funny watching people squirm and I got to say I kind of like that a little because just as well as me, when you're looking at someone's finances or you talk to someone about something, it's kind of evident on probably what should be done.

Right, so you can kind of see the direction that they're taking themself and assist, guide them back. One of the counselors in my son's school always calls it that readjusting their course correction, doing a course correction for kids, not doing a hard stop. So you just kind of gently course correcting people to keep them motivated.

But it's pretty cool. I like that side of things when people realize that, wow, all I need to do is stop going to target so much? I haven't heard that one yet Jen, though. That's, a bad sin though because my wife tends to be on Amazon more than Target, but Oh yes. Amazon and Target.

Jenn: I always say my zip code is 968-Target. I was talking to somebody about this yesterday because because we were talking about 0% interest for credit cards and I said when I had credit card debt it was only about $5000 or $6,000 and I could have transferred it to a 0% interest, which would've made financial sense, but I didn't because I wanted to feel that hurt. I wanted to feel the hurt of the interest every single month so that I would pay it off faster. And I did. I was able to pay it off within like two months versus if I had put it on a 0% interest card for 12 months, I probably wouldn't have felt it. It probably would've just been a band aid, and I would've just made the minimum payments every single month, only at the end to be like, oh my goodness, now I have to pay $4,500 to not get this interest accrued. So talking about that hurt. I think that's great that we should put that into practice and then also just reevaluate what's important to us.
 
We always talk about things like what sparks joy to you? If that $7 latte sparks joy to you, keep it in your budget, but then maybe you take out the cable that's $200 a month. 

Brad: The odd thing is that when people have to make sacrifices you see where they sacrifice, you see what is important to them, and mentally that's a challenging thing.

Yeah. I mean it's how, how do you do it when you that it's, it's the right thing to do to give something up. I mean, are we just pulling the bandaid off on your side or what, what is your theory when it comes to advising someone that it's kind of plainly obvious they need to stop doing so?

Jenn:  I've heard the term that people say is, you have to stop the bleeding. So people are like, well, I  want to buy, I  want to purchase a home organizer. I want somebody to come in and organize my office, organize my home, because I can't get any work done. Hmm, that's great, but how much does it cost?
 
And do you really need to start doing that when you have thousands of dollars in debt right now? Well, maybe not. Maybe you can hold off until you can get your finances under control and then you can think logically. What is the best step moving forward? Because we make so many decisions emotionally and when we make emotional decisions I know for myself, when I make an emotional decision, it's not a good decision. 

Brad:  And that to the 0% situation, I mean, it was so popular before there, there weren't any balance transfer. There weren't fees to move around credit. And now that there is, you got to factor that in. And there are smart people out there, there's smart people out there that want to deleverage money where they're, they're saying that they're going to move money from one higher interest rate to something with a lower interest rate.

Yeah. They'll pay the fee. But what happens is like, they’ve just freed up one credit card by getting another credit card, and that freed up credit card tends to get balanced overridden again. And we've seen it countless times. We've seen, that's why credit scores are so relevant not to jump into something different.

Credit scores is a historic look at people's spending habits and or inability to right, and it is valuable. Before, I used to think, oh, that's such a bummer. Someone just got one little bad hiccup and credit is ruined. That's such a bummer for them that may happen. There are definitely tragic stories for people that have had their credit stolen or had that one moment.

Most of the time it's an accurate description of someone spending. And inability to pay in some cases, whether we're doing a refinance that can use their home's, equity to pay off all of their debt monster amounts of debt, credit card, unhealthy debt putting it into their mortgage, increasing the time that they're going to be in the mortgage and it's because their life gets flipped upside down. All the analytics on it are beautiful. The day that they wake up, I have great comments from them. They call me. They're so happy. It feels like a new day. Right. Unfortunately, the credit report has shown that historically the debt will come back and sure enough it does.

It's often that the debt comes comes back because that's their spending habit. If they're used to paying $2,000 a month in credit card debt and I can help them turn that into $400 a month, I felt like I've done my job. I was very excited. It's very, it feels good to me that extra $1,600 a month that they're saving every month that tends to get spent and that tends to deliver them a brand new set of problems.

And.  just because we consolidate debt or they get that 0% credit card, that doesn't mean the fight is over. So I've learned over the years that we need to check in with people and it's a constant battle. It's like quitting smoking or quitting some sort of vice in your life. There should be some accountability to these sorts of situations.

And it's, it's never been so evident that now when times and the pandemic has magnified every single person's insecurity, every single person's weakness. They need help. They need, they need some accountability. And I like to think that that's what I'm into just making sure to check in on people and making sure that what's going on with them, and I can't talk to them.

Like now when you go to a doctor that you've literally have shown them everything about your life and. You can talk to them very easily. I'm not sure if you noticed that I can talk to my doctor very easily about anything when I'm not ashamed to tell them about any kind of physical ailments or whatnot, because I did it once and I created that relationship.

Same thing with someone like myself. I like to think that that relationship where I can ask them, not a problem. If I see them at a restaurant, I have no problem with some clients just saying, Hey, so what's your credit card balance now? You would never do that with never. And that's the kind of person I am.

It's just, I  want to make sure that a line of communication is open. Because if no one's asking, no one's telling. And if we're working on something, then there should be no anxiety or self anxious moments for people. They should just be ready to tell a story about it and address it. Because most people have debt, most people.

Jenn:  One important thing that you said is creating that safety for them that giving them permission to tell you everything and being transparent with their finances like I went to the doctor with my dad yesterday because he had to get some tests done and so forth. And the doctor was just asking him question after question after question after question, and I kind of saw the look on his face.

He was like, I don't really want to answer that question. But after he answered that question, the doctor just moved on. He didn't think anything less of him. He didn't think like, okay, why are you answering that question that way? It was just, is it a yes or no. And then let's move on.

Brad: So I know how to properly diagnose you and I can give you the correct treatment that you need to do moving forward. Yeah, my dog actually the other day started walking funny, not other day. I think it was a couple months ago, but what's walking funny and it, it's a puppy. It's one years old walking funny. It threw up and it's a little Shaun puppy and I don't know. Almost like fainted or something. So it was real scary. Took her to the vet and very matter of factly, my wife took my dog to the vet, very matter of factly. The doctor said, so, do you smoke and, and my wife's like, no.

And almost like consistently the doctor either assume that my wife smoked or I smoked and the dog got into it. Cause that's one of the ways that dogs react, those symptoms that the dog and I kind of instead, instead of like getting upset, while my wife's on the phone with me going, do you smoke?

S she knows I don't, but it's like, no. And it, for a little while, you're a little offended by the question or the assumption, but like you said, that's the doctor's, the vet's job they don't care. They're trying to help the dog, right? So just like you said, we, I don't care about the problem.

I want to fix it. Same with you and seem like doctors. So, it is definitely something that I've gotten used to just asking very straightforward questions that might be sensitive to some. Once they find out what I do or, hopefully they know what I do prior to the question, then it does, it, it's, it's very relevant.

It doesn't waste time too, right? It's, you could spend so much time working on something and someone could have told you this a long time ago that they had a bankruptcy in 2006, you to keep dancing around it and we could have addressed that instantly and just taking care. Yeah, so good. And that is a really odd question for the vet to ask you, but that's really interesting,

Jenn: That's a great story. I appreciated the question after thinking about it. Yeah. And you talked about credit too, so I kind of wanted to dive into that too, because not many people know. People know that when they're applying for a mortgage, there's a lot of information out there that don't apply for new loans.
 
Don't do this, don't do that. But what are some things that you are seeing that people are doing while they're trying to qualify for a mortgage? That's a definite no-no. 

Brad: I see car leases and car leases right now. I think it comes with a certain aura for people. Especially if they're self-employed, that they can get a new car, first of all, if they're into cars.
 
I hate car shopping. I don't know about you. I can't stand car shopping in. I don't buy new cars all the time. I ride mines till it's dead, and it's just, I, that's a. Five-hour event, and I hate that. But car leases are people like cars. They want a new car, it's very trendy. They want a new car and they come to the belief that they can write.
 
The interest on the car, they get right off the car? And if they're trying to qualify to purchase a bank, first is going to hit you with the car debt, right? The debt of the monthly payment, unfortunately, for car leases though, is there's no end in sight, even though it's a 36 month car lease, five year car lease, even if you're in month, 47 of a 48 month.
 
And you have a thousand, $1500, $2,000 car payment, which by the way is low. I've seen crazy car payments out there. The bank is going to hit you for that debt no matter what, because they assume that once the lease is done, you're not going to go carless. So they're going to hit you with that debt no matter what. As opposed to a car loan.
 
If you have a car loan and you have within 10 months of paying it off, so within 10 months of paying it off. They erase that loan from your debt profile because they know you're about to pay it off and you're going to be free of this car payment in 10 months, even though we're going to buy our home in the next 45 days.
 
So it's, it's, it's what I see a car lease is, it's a tough go because also too, if we need to get them out of that car, There's a lot of stuff that needs to happen to prove that they've either bought out the car lease and they're not going to renew it, or they've, they've inherited a car from someone else.
 
It's that and that in timeshare, those are those two things that just, they kill people. They kill people, and unfortunately people are bored spending sometimes in, in these times where, wow, you spread that car lease payment. And you see that you can get that brand new car for a very affordable payment.
 
It's easy. It's easy for them to do it, but it's so hard when they come back to us trying to, trying to purchase a home if it's close. Obviously if it's close, okay, so say they did pay off the loan and they're ready to close on this house within 45 days, is the bank going to look and see if they are, have applied for another loan to get another?
 
Car. Yes. Or maybe they're trading it in. They'll see everything, any inquiry on your credit, they'll see it and they'll ask you about it. And you can't just answer. You need to show proof of whatever you're about to say? And it's, it's, it's an interesting situation because you are guilty until proven innocent.
 
In the underwriter's mind, it's opposite of the world. They believe everyone's lying to them at this. With interest rates going up there's so much advantage to being in certain situations for your loan application that they pretty much assume everyone's kind of not telling the truth. So you gotta prove it.
 
You gotta go in there guns blazing and prove it that you have the right work history that you did not actually buy that car that chose Honda Winward. Honda pulled your credit. You gotta show that. And they want documentation for it too. The worst this is common, not that big of a deal, but very common is right before you buy, we're talking about shopping at stores.
 
I've never been guilty of it, but I've been tempted where you have that big purchase and at the store cash register, they ask you for that. You want to get 25% off by signing up for the Macy's card that is irritating and very difficult to manage when you're trying to purchase a home because the second you do that, first of all, the person at the cash register could be someone that's not typing your name incorrectly.
 
They could type your social security digit, they could type your address a little wrong. So then you have this problem with matching up these two debts, so that's number one. Number two especially with the department store stuff, whatever your balance is. So if you have a $900 balance, which isn't that big for a lot of people, they don't, when they report it to the credit bureaus, the $900 balance shows up as your payment.
 
So we use your debt. Based off of the minimum monthly payment that you owe. So for a Visa credit card, you could have $5,000 on there, but the minimum that you owe is 200 bucks with a credit card from the department stores. If you have a $9,000 balance, your payment shows up as $9,000. So when you're trying to get qualified to purchase a home, How could you possibly do that if you have a $9,000 per month obligation, which we all know isn't true, but that's how they report it to the credit bureaus.
 
So that's why there's a problem  and it's just an irritating thing. But in this holiday season, I would make sure that that doesn't occur if you're trying to buy in the first quarter of the new year, because you can't prove the payment, because you can't get a statement as well. If you're at Macy's today, the 6th of December, You're not going to get your statement until maybe early February because it has to go a whole billing cycle, and then it takes a few weeks to process it, and then you get your statement in the mail or online.
 
Prior to that, the bank has no idea what the payment is going to be. So they have to make these rules and they hit you with a payment on your debt profile, and that really hurts your qualification situation. So yeah, in this holiday season, be careful, be careful about getting those credit card.
 
That's so good. Yeah. Especially now. Yeah, you're right. There's Macy's, target, Kohl's, wherever you live there. This is a time right now that they're really wanting you to sign up for those credit cards because not only does it help the employee get their bonuses, but it helps the store and et cetera.
 
But come on, if you are buying something that's a hundred dollars and you're only getting 20% off, is it really worth hurting your credit over it? Right. And then what if you forget about it, then you're going to get hit with the late charge et cetera. Yeah. If you can't afford it, just don't do. Yeah. And, and then I, I make fun about it all the time cuz when we go into closing when, at that time where you're signing, you're signing for the house, it's great.
 
Sometimes on one of the forms that we have to do there's a form that goes through the misspellings of your name and the misspellings of your name versus your social. And a lot of it comes from these department store situations because, hey, I mean, our names are not short by any means. And if you're saying it to the person behind there, who knows what they're typing in.
 
They get a little bonus when they sign you up for this thing and those variations in your name. You don't want too many of those associated with your precious social security. Now they're trying to do a lot of credit reform. This has been whispered in our industry for many, many years. I'd like to think that it's getting better.
 
At the same time, there's, it's almost so common that if I were to pull anyone's credit, your, your credit included anyone's. There's going to be some sort of misreporting, my credit there. There's something at one point in time your name was spelled wrong. There's a misreport something, your, your name could be the identical name of someone else in California.
 
It's just, it's so common. And so, like you said, with something so precious, I get the temptation of the 20% off. It's just, is it worth it? And for. It took a few years of my wife calling me at the register, literally at the register, and I'm like, no, don't sign up for that, that credit card. Don't sign up for that overdraft protection.
 
Don't sign up for this because it just isn't worth it. So good. Yeah, I recently learned that, the credit card, the credit report that you pull up on, say,  , you signed up for Experian or one of the three, is not the same information that you guys see on the mortgage side. Can you explain more about that?
 
Yeah. It's all algorithm based, so if someone's looking to purchase a. You heard of a hard credit pool and a soft credit pool. What is the difference?  , the soft credit pool algorithm, the formula that they use to come up with their credit monitoring, those are like, like a broken scale.  , the scale.
 
If you use it every day, it's not the correct weight. You can see a trend of up and down no matter how broken the scale is. So I would say that the soft credit checks and the soft credit pools, if you use the same one, you can see a trend in your credit, his in your credit score. The credit score itself though, is not accurate because the hard credit pool we use, so Tri Merge, there's three bureaus that we use, and the algorithm that is used to get that information is much different as far as history, late payments, how it's scored, and.
 
How much your balances are. A lot of people don't realize this but having a balance on your credit card is actually a good thing. It's crazy. That may sound because here comes the conspiracy theory it's, that's what a lot of people say the credit card companies are giving you a better credit score because you're making them money.
 
If you pay the credit card off every single month, which many people do, they're not making any money when you think about it, right? There's no interest being paid to the credit. , there's the annual fee. But if you have a credit card that has no annual fee and you pay the credit card balance off every single month, there's no any interest going to them.
 
So you're not doing them any good. But if you have a balance on there and you're paying them interest, they like you, so they'll actually rate you better because you're paying it on time. That's a key. You're paying it on time, but you're not paying it off and you're paying them money, they're going to grate you better.
 
So the, the algorithms that we use, not we personally, but the bureaus that report to the credit report companies that we work with, they're, they're very, very much more detailed about the history of someone's credit. And that's what I was meaning about earlier, where it's a fingerprint for everyone. It's so.
 
It's so unique, and that is literally if you go to see someone like a doctor and you're, you're thinking that they're going to do a test or something and they do no tests, but they give you some sort of remedy that's kind of scary, right? Like, they don't do a test for you and they say, okay, you have diabetes or something.
 
I'm not a doctor, but, and they say that without doing any sort of test. That's scary. Same thing with a mortgage professional. If, if I'm working with someone and I don't pull. I start talking about strategies on how to get you pre-approved. Something's wrong,  something's wrong because I don't know the history of the credit.
 
I don't know what I'm working with. And a tri merge credit report, a hard, critical is important. Is very important. And it's different than Experian or the Equifax or the TransUnion, single credit card reporting, or credit Karma.   I, we endorse annual credit report.com, all one word, annual credit report.com, and that's the governed entity that allows you to look it up.
 
It, it's from the government. They allow you to check much like we would, and it would show the history much like we would see without having a hard credit poll. And you can do it once a year and it's free. You, you can't get your credit score, but you can see your credit history and you can take that, and you can send it to someone like myself.
 
And that's kind of what I would want to see. I usually recommend that for people. If someone tells me I have really bad credit because of this, this, this, and this, and it's current and I know it's bad, I. Go to this annual credit report.com because that soft, no hit credit poll will allow me to give advice without doing my hard credit poll.
 
And the difference is, is if you're have bad credit and then you have a credit pool, it can really hurt you. But if you have good credit or good credit, my credit pool isn't going to hurt you that much. Much like health, if you're sick and then you get exposed to something. It's more likely that you're going to have a bad experience, health-wise.
 
But if you're healthy and you get exposed to something, maybe you won't get any effect to it. Or maybe you'll just have the sniffles or something. Same thing with credit. So, the hard credit pool is definitely different. It's more invasive, for lack of better words, because we want to see what's going on there.
 
And I highly recommend to anyone that's watching that if they're trying to get preapproved. You don't go in there going, I want you to pre-approve me, but I don't want you to pull my credit. I usually don't work with those kind of people. I usually educate them, and if they still don't want me to pull my your credit, then I can't put my name to that pre-approval, right?
 
Because they can have the perfect job. Lots of money in the bank according to them, no debt, right? Everything looks great. The second you pull your credit, like I said earlier, fed a bankruptcy last. They had something really go wrong last year in the pandemic time, they were foreclosed on,  ? And that's the kind of stuff that you need to know about.
 
You need to know about. And so credit hard pulls are invasive. They're meant to do that though. And they're meant to help if you use it correctly. So you don't want a mortgage professional that's going to pull your credit, see that you're no good, and then leave you because that's valuable information. You and we, and we're not allowed to give people their credit.
 
So you want a mortgage professional that's going to pull your credit, stick with you regardless of the outcome, and get you into a better status. Cuz it is valuable. So yeah, so good. Especially, I like the credit reports because it, like you said, right, it shows what your habits are. Yeah. What your history is.
 
You if you're capable of making this $4,000 payment down the road or you're going to file for bankruptcy kind of thing. And it's the same win thing with budgeting. , people ask me all the time, should I do a debt consolidation? Should I do this kind of program? And I'm like, no, because you're not changing your habits.
 
It's eliminating your debt. But. How likely are you going to get back into debt one year later because you haven't established these good money habits, right? And so when you establish the good money habits, if you get into debt, say it's not your fault, but maybe you have like some kind of medical thing or something, you lost your job unexpectedly.
 
You can dig yourself out of there because you've established this good money habits. So that's so interesting that someone would come to you and say, can you please not pull my credit?  , but a lot but needs to be approved. Yeah. And, and there's a difference, right? There's, it's called pre-qualification.
 
Pre-qual was a different time. There's a pre-qual and a preapproved, and everyone's like, let's get pre-qualified cuz pre-qualified I could do for you right now, Jen, verbally, you tell me how much you make, how much your debt is, and you're, you're telling me I have no bad credit history. Then I go, okay, based off of that, you're pre-qualified for this.
 
And it holds zero weight. Zero weight. If you were selling your home and I came Bradley Shino with this pre-qualification with no documents to verify what I told my loan officer, you would probably take the other person, Bradley Shino, who was pre-approved and gave W two s bank statements, pulled his credit, got everything verified.
 
That person's looking a lot better. So pre-qualification basically does nothing anymore and people just are misconceived. They, they misunderstand what a credit pool is for. Don't pull my credit because it's going to hurt me, but that's what it's for. I don't  want to give a blood test. I have a crazy story about my last blood test, by the way.
 
I do not like blood tests and it is terrifying for me. I don't  want to do it When you have. That's the point of it.  , it hurts. You don't  want to, but you have to. You gotta show the doctor everything. And like you said, I love credit reports. You can help someone so greatly by just having them see what's up.
 
And I, maybe me and you should be on a counseling thing with each other because we probably heard everything of people worried about this and that story's like crazy,  , because of,  , if they don't, it's an embarrassing thing sometimes and I don't feel like it's something should, that you should be embarrassed about at this point.
 
Especially with someone like us who hear it a lot. It kind of like means nothing at this point. It's just that's the facts. Let's move on and let's do this. Let's work. Perfectly said. Yep, that's right.  , in our industry it's so important to create that safety, that it's just numbers. Yeah, it's just numbers.
 
It doesn't make you a good person, doesn't make you a bad person. It's just numbers and how do we move forward so that we can get you to where you need to be. Yeah.  , this has been such a great conversation today and,  , Alden and I really enjoy working with you and your associates. But if someone's,  , listing out there and they're like, I just  want to see.
 
What I need to do to get pre-approved. How can they contact you and what are three things that they'll need to get ready so that you'll be able to provide that information to them? Cool. Yeah, I appreciate that opportunity. Well, they can come to our website, that's the, the main one. Bb mortgage hoy.com.
 
You can get all of our information, our history introductions to our loan officers, our support staff and whatnot, and you. The, the main thing is I just, there's not three things. I just want a conversation. I mean, if, if they just want a conversation, as you can see I, I, we can talk about this forever.
 
We've only scratched the surface, you and I, and if they just have a quick conversation, I'm more than, I'm kind of like that too.  , my wife's always on. All you do is you download this app and you can go to Taco Bell and make your get your tacos and all that and go in there and pick. For some reason I don't do that and I just drive in and make my life hard and order it at the counter.
 
I want to talk to someone sometimes. I like feeling comfortable. We have the ability to accept your application online, but I like talking with people first, cuz that's what I like to do initially as well.  , it's a relationship and they're interviewing me. I'm trying to earn their business for sure.
 
At the same time, I'm interviewing them as well cuz I want to make sure that our relationship is going to work well together. And if I'm not going to be able to assist them based off of whatever characteristic that each other has, I'll be upfront about it in the start. And I  want to make sure that we have a good relationship throughout the transaction.
 
I just want, want a call? Yeah, just, just get, get a call going and we can talk story about the details of the procedure. Awesome. 

Jenn: Thank you so much for being on the podcast today and we’d love to have you back. 

Brad: Yeah, anytime, Jen. I appreciate it.