Scott Stearns of MortgageBanc joins us for a TWO part Biz Talk series that everyone will benefit from. Scott has 19 years in the mortgage industry & will be dropping a lot of knowledge & advice for navigating the housing market. We will also cover credit 101 & how to prepare or repair your credit for buying a home.
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Read the Full Interview Below
Sarah: Good morning everyone, at 8 a.m., time for Biz Talk, and we say this a lot, but today, boy do we have a good guest! We are anxious to get started. Let’s go.
Glyna: All right, good morning, everyone.
Sarah: Good morning.
Kelsi: Good morning.
Scott Stearns: Morning.
Glyna: Hey, it’s a great day today in the Fusion One Lounge. I’m Glyna Humm and around the square here we have our other marketing gurus. We have Kelsi, I almost said Munn, but Kelsi Nicholson. I have to get used to that! And Sarah Gilliland.
Sarah: Good morning.
Glyna: And before we get started, Sara can we put up our broadcast?
Sarah: Yes, I’d be happy to do that. Okay don’t forget, every single week we go live on Facebook, YouTube, and Twitter, and you want to make sure that you subscribe to our great podcast Marketing and a Mic, and don’t forget to follow us on Instagram and LinkedIn. And it’s also important that you go ahead and subscribe to our YouTube channel. I’m telling you, every single week, and I mean it, every single week we are putting out brand new videos, all in the name of marketing, all in the name of business. All good stuff, so you want to make sure you subscribe.
Glyna: Yes, really good stuff. Okay, when we were meeting with our guest this week to do a little prep for the show we just realized there was so much great information that everybody needed that we’re going to do a two-part segment. Today we are going to start off talking about basic mortgage information and what you can do for the people out there. I want to welcome Scott Stearns from MortgageBanc.
Scott Stearns: Hey, ladies, thank you, thank you for having me!
Glyna: Well, we are so excited to have you today, because in today’s world the real estate market is nuts and crazy and they need somebody to help guide them through this process. We’re so excited because you have info for everyone. Let’s go ahead and just get started. Tell us a little bit of an overview of how you got into the industry.
Scott Stearns: I have been in the industry now for 19 years. Before the mortgage industry, I was actually a teller at the Birmingham Post Office Credit Union, so I started-
Scott Stearns: Doing automobile loans, and I got into the loan process and how that works. I started seeing that I could show people if they would do a little bit more they could save this much interest on their loan, so the credit union didn’t like that so much, so I was only there for about three years and they caught on to that I was costing them money on interest. I moved over to actually the small business administration with the government, but I was on the home loan side instead of the business loan side. We would come in when a tornado or a hurricane would destroy an area and we would give low-cost mortgage loans to help people rebuild their home. At that time our low-cost loans, the normal rate on a mortgage was about nine or ten percent and our low-cost loan was 4% at that time, 25 years ago. Well, now in today’s market the mortgage rates can be below 3%, so we’re even lower now than what the government provided loan was back then.
Glyna: Well, and you have a lot of specialty areas. Tell us a little bit about those services and those specialty areas, or touch on that real quick.
Scott Stearns: As I said, 19 years in the industry as a, what we call a forward mortgage, a regular mortgage like everybody is aware of when you buy a home or refinance a home. So 19 years serving families doing that. Ten years ago I added my VA certification, so I’m a VA certified mortgage specialist. I did not get the privilege to serve, so this is my way to try to give back to some of those veterans and their families that have served our country and me indirectly. Ten years serving the veterans and then four years ago I also added the reverse mortgage product and that is for an individual that’s 62 or older and still making a mortgage payment. A lot of times that gets a negative rap, but HUD and FHA came into that program in 2013 and revamped the entire program. It’s now fully insured by FHA and people just don’t know the new guidelines.
Glyna: Which we’ll help them with next time, won’t we?
Scott Stearns: That’s right.
Kelsi: Come back for part two!
Scott Stearns: That’s what I do.
Sarah: There’s a lot that you do differently that I think is what makes your service so exceptional. Out of the gate, how you introduce yourself to clients, the new clients is to me so valuable. The first piece is that you do get to know Scott Stearns. This is a real personal touch and you had said that you put this as well into a video. Along with that, you had told us that a lot of times new clients are getting this itemized fee worksheet. They don’t know what the heck it means. They don’t know what all these numbers mean and it’s really overwhelming. You have sort of, I think, a really nice, personable approach to make that introduction and to go through that process and make it so much easier. Kelsi actually has a video that you were kind enough to put together for us to give us a little sample of what you do.
Scott Stearns: Video Audio: Hey Fusion One team, Scott at Mortgage Bank, listen we’re going to go quickly so the video’s not too long. This is what I told you. Instead of sending a spreadsheet with a bunch of numbers going everywhere, I send this video. It’s a breakdown and it’s really, it’s come in handy especially during COVID because we can’t meet face to face. This is almost like meeting face to face. This example is an FHA, Ginny Mae loan, would go directly to Ginny Mae, or Fannie Mae or Freddie Mac, so the least amount of documentation and lowest rates available. This example is $300,000 purchased. FHA has a minimum down payment of $10,500 so you would finance $289,500. The total loan amount looks different and that’s because HUD automatically finances a portion of the mortgage insurance. But the minimum down payment, instead of having to save up 20%. This is my estimate at this point. We don’t have a property address, so this is my estimate for the annual homeowner’s insurance premium. The escrow account, that’s nothing more than a fancy word for a savings account at the mortgage company instead of your bank. When you make your one payment each month it covers your homeowner’s insurance, your taxes, your mortgage insurance, everything. For example, 100 a month times 12 months in the year, that’s 1200. That’s where that premium comes from. Then, over here’s the entire transaction, the purchase price, closing, taxes, and insurance, that mortgage insurance is financed in so we’ve got to show it as a credit here, otherwise, it would look like you owed this out of pocket and you did not. Then, your other credits come into play here. Credit for the loan amount, this represents the non-borrower or the seller paying their half of the attorney and title. If you put $1,000 earnest money on the contract you get credit for that. Then, in this example, the seller’s paying $4,000 towards closing. Out of the $10,500 minimum down payment required, $10,500 of this is the down payment, so there are only a couple hundred dollars over that would be due. I hope that makes sense. Have a great day!
Sarah: That’s awesome.
Scott Stearns: Thanks.
Sarah: That was great. That’s a really good touch that you do at the beginning. That kind of helps new clients digest everything.
Scott Stearns: Yes. Thank you, Sarah. The number one comment, the response I get from that video is when I’m talking to a couple, one of them is at work, one of them is working from home during COVID. They’re not together. They can’t remember what I said. They don’t know the terminology. They don’t do this every day. The national average is they do it once every seven or eight or ten years, so the video, they come home, they sit down to dinner, they push play and in two minutes they’re on the same page. When you understand something it takes that nervous edge away and you’re like, “Okay, we’re not going to owe extra money. Here are the dollars, here’s exactly what it is and it doesn’t leave any room for misinterpretation.
Kelsi: It’s huge. That’s exactly what I was going to say, if one spouse is working with you and the other one’s not there, how am I supposed to remember exactly what you told me about all those numbers. Great, great idea.
Scott Stearns: It’s a time saver for me and it’s a time saver for them too. When they can relax and understand the numbers, then they can go out looking for homes confidently and they can relax now, so it can be fun like it’s supposed to be buying a new house not worried and stressed about the numbers.
Kelsi: Exactly. Along with your cost sheet with those specific numbers, do you include anything else that would help them know their exact closing costs prior to going to the closing table?
Scott Stearns: The video that you just played is basically you would call that day one. When I do the pre-approval, I work up which program is best for them. Sometimes, most times people are qualified for several different programs and I’ll show them different options so just for time’s sake I just showed you that one FHA option. On that video, I noticed I said the minimum down payment for FHA is $10,500. That was the dollar amount. I should have said the minimum down payment for FHA is 3.5% of whatever the purchase price is. In that case, it just happened to be 10,000. On a $100,000 house it would only be $3,500, so 3.5% on that. That’s day one on the itemized cost sheet to let them know what everything looks like. You saw on that video I said this is my estimate for homeowner’s insurance because we don’t even have a property yet. The property taxes are tied to the home as well, so I have to estimate that. I try to find out what zip code they’re in and then I can kind of dial it in from over the years of experience to be $100 a month instead of $300 a month in another area for taxes. That’s the estimate. When we go through the whole process and we’re getting ready for closing, three days prior to the closing I send what’s called a CD, a closing disclosure. It’s five pages long, so instead of sending them an email with a five-page document for them to weed through, I make another video that’s customized to the numbers that they’re going to see when they’re sitting in the room with the attorney and their real estate agent and the people they’re buying the house from and me. I go to my closings. Before they get there they’ve seen everything. They know exactly what the numbers look like. They know the address of the attorney’s office that we’re going to, they know how to wire their down payment money. Another thing that it started doing that I didn’t realize is when we get to the closing they say, “Oh yeah, I saw that on Scott’s video,” and the attorney looks and goes, “What video?” They say, “Yeah, we’ve seen all those numbers. That’s exactly the amount that we wired or here’s the check for that amount.” Then, he doesn’t have to go through that five-page form line by line, so we’re saving money at the closing, I mean, time at the closing table and they get the keys to their new house quicker.
Kelsi: Yeah. That’s awesome.
Sarah: That’s so smart.
Glyna: Awesome. That’s what it’s all about and like you said it’s stress-free, and the money part is the worst part for everybody.
Scott Stearns: That’s when you sit down and you get to the amortization page and you look down at how much it’s going to be after 30 years and we’re like, “Don’t look at that page too long.” It just makes it flow better and a lot of people, that’s available to anyone, but a lot of people don’t take time to do it for their clients. For me, it’s a little selfish. It’s service first, but it’s a little selfish. It saves me time too.
Glyna: True. Well, it just makes you have more time for the important parts instead of getting in the nitty-gritty. We have people tuning in this morning. We have Kirk Edmunds. We actually have Cindy Edmunds too, so we’ve got both of the Edmonds this morning. We have Melissa Dixon, Roxie Kelley, Gayle Mason, Steve Johnson. Gayle says, “Scott, that is really awesome the way you do things.” And then I have a lot that Melissa wants to say here if we can pop that up. She says, “We’ve worked with Scott twice. He’s absolutely fantastic. His personal breakdown videos are so valuable for those of us who get confused easily.” Then, she has a question. Scott, how will the presidential election affect mortgage rates?
Kelsi: That’s another segment.
Scott Stearns: We’ll do part three in three weeks.
Sarah: Yeah, the interest rates kind of fluctuate based on how the debate goes.
Scott Stearns: Yeah, exactly. In a Presidential election year what we have seen in my years, 19 years, what we have seen on those Presidential election years about a month before and a month after the election the rates just really flatten out and there’s not a lot of up and down movement in anticipation of who’s going to take power. This is, whatever side of the fence you land on in this election, I think it’s the most important one that we’ve ever had in history, so I would only be speculating, Melissa, if I said what the rates were going to do. However, I can say that the Feds continually have given us correspondence through different subscriptions that I have that to restimulate the economy out of COVID, out of 30 plus million people being out of work, they’re going to do whatever it takes to keep the rates down on through at least the second and maybe into the third quarter of 2021.
Glyna: That’s good news. That’s great news!
Scott Stearns: And that’s independent of the election results.
Glyna: Okay, fantastic. I know I’ve heard you talk about Fairway and obviously, I know that you’re with MortgageBanc. What is the relationship between Fairway and MortgageBanc?
Scott Stearns: Okay, great question. We’ve known each other for a lot of years and you knew MortgageBanc. A lot of people don’t know Mortgage Bank’s name in the Birmingham market and the funny thing is we’re the largest, independent lender in the entire state, but we don’t advertise. You don’t see us on billboards, you don’t see us on TV commercials, you don’t hear us on the radio. With this kind of service and the system that we work in, we get our referrals from the real estate agents, the attorneys at the closing with a rough closing, they’ll pull the realtor aside and give them a mortgage bank business card and say, “Hey, this never happens with MortgageBanc. If you keep running into this, you may want to work with somebody over there.” MortgageBanc had their name established in the Birmingham market for 20 years now. Then, about eight years ago we saw the need that we needed to branch out and have kind of a big brother with us, so we started looking around. Fairway Independent Mortgage Corporation is in all 50 states. They’re in excess of a 50 billion dollar a year mortgage company, so that puts them in the top three with Quicken Loans and Wells Fargo on their mortgages. The funny thing is mortgage banks, the largest in the state, we have one office on 280, Highway 280 in Birmingham with about 50 agents, 50 loan officers. We started branching out a couple of different places as well, but some of the other banks have a branch on every corner and we’re outperforming them two and three and four and five to one just because we make our clients a family. We talk about them with their name, not their property address, so not their loan number. Fairway came into play eight years ago. They’re our big brother and they’re the ones that give us direct access to Fannie Mae, Freddie Mac, FHA, VA instead of … So we’re a correspondent lender. We go direct to those entities. We don’t have to go through another lender or a middle-man situation to get to the money that we need for our clients. That saves time, that gives us lower interest rates, and that’s less paperwork as well.
Scott Stearns: MortgageBanc/Fairway relationship is like that. A lot of people go, “Fairway, is that like a golf company?” Actually, the company was founded, they named it Fairway because they wanted to do business in this industry the fair way.
Glyna: Got it.
Kelsi: That’s great.
Glyna: All right. Sarah let’s talk about “refi”.
Sarah: Yes. Okay, so you offer to refinance, but I want you to kind of tell us more about how it works and how things have changed a little bit now with the refinancing process since COVID-19 came into play.
Scott Stearns: Okay, yes, so we do a lot of refinancing. We’re a purchase business first because the purchase business is the true business in our industry. When somebody needs to buy a house for their family it doesn’t matter what the interest rate is. When someone needs to refinance the rate needs to probably be lower than what they already have.
Glyna: It helps.
Scott Stearns: That sounds obvious, but sometimes that doesn’t apply across the board, because sometimes they may be restructuring some things that save them hundreds of dollars a month and we could get the same rate, but restructure some things, make it tax-deductible and they save three or four or six or seven or $800 a month on their monthly cash flow. What’s happened just recently, Sarah, on the refinances from Fannie Mae and Freddie Mac, that’s ultimately where the money comes from, the public cannot access that money from them. You have to go through a bank or a mortgage company or a credit union. Fannie Mae and Freddie Mac lost billions and billions during COVID, during what you heard about forbearance and foreclosures and then deferments of payments. There was a lot of uncertainty about what a deferment was and what a forbearance was during that time too. They lost a lot of money during that time period. What they’ve done recently is they’ve added a half percent to the margin on refinance transactions only, not purchase, but refinance only. That is impacting the interest rate you can achieve on a refinance right now. They’re still fantastic, but what we’re seeing is a lot of our clients that just got caught in the middle of this, these loans have to be delivered before December 1st, so even if we started today we couldn’t do everything and get it delivered to Fannie Mae by December 1st, so we’re already having to implement this into the new loans. It’s either a half percent difference in the margin, which makes the rate higher, or what my clients have done, I’ve worked up the numbers and I can show them, “You can still get the lower rate, but it’s going to cost you whatever, depending on their loan. It may cost you $800 in a discount point to keep that lower rate.” Well, I divide that out and show them that in 16 months the monthly savings compared to the $800 investment, you’re going to recoup that in 16 months and then you’re to the good from then on out and your interest savings is there. The rule of thumb on that is you recoup your investment in 36 months or less. It makes financial sense to do that, to spend that money to buy the rate down.
Glyna: That’s a good point.
Scott Stearns: If not, it’s not worth it. That’s kind of what’s going on right now and that’s going to go forward. They’re trying to build up a reserve account for those billions and billions of dollars of losses that happened during COVID. COVID impacted everything we know in our life.
Kelsi: It really did and surprisingly the housing market has stayed on fire through all of this. There are multiple transactions on almost every house that’s listed and on a lot of occasions within hours of a listing going active there’s offers already on the table. What is your “golden goose” to help your clients put them in a position where they may have an offer actually accepted and get the house that they want?
Scott Stearns: Okay, so it sounds like you’re reading my mind, and that’s kind of freaky, Kelsi. Thank you very much. That is exactly what’s going on. You said, Glyna a while ago that Cindy Edmunds was on the line. She’s a fantastic real estate agent in this market. She can tell you that within hours there’s an offer, there are multiple offers, and a lot of times right now the offer is requiring what’s called the highest and best offer because there are so many offers. The most recent, just crazy offer situation that I was involved in, I had a female FBI agent moving here from Pennsylvania. She was the one that did the lie detector test for the new recruits, so I really, I figured out I don’t want to play poker with her and-
Glyna: Or lie to her.
Scott Stearns: You know, I was trying to not touch my face, not move my tells or whatever, which I don’t lie anyway, but it was just funny. We had a good time, but the house she found had 22 offers on it.
Glyna: Oh, good gosh.
Scott Stearns: This was perfect … She had been looking around for a long time, she’s moving here from Pennsylvania, so she really wanted this house. The price was right, everything, so we went up on the offer, but there were still 22 other offers. What we did is we gathered her information upfront. We gathered her tax returns, her pay stubs, her W2s, her bank statement to show where her down payment was coming from, pay stubs, everything, and we issued a guaranteed closing approval letter. I think I sent you a copy of that, but it’s also in a brochure form as well. It just says, “We guarantee the closing and if it doesn’t close on time for any reason, if we missed something in the process, we’ll make it right up to $7500 by paying back the cost of the home inspection and the appraisal, paying temporary living expenses,” so sometimes somebody has to sell a house and they’re under contract and an obligation to sell a home and then if we weren’t ready we would put them up somewhere, temporary living expenses, and we’ll reimburse their earnest money to both parties just because of the hassle because we missed something. We put our money where our mouth is, we issued this, the last four years we’ve issued this over 1,000 times a year. We haven’t paid it out once.
Scott Stearns: The question you have to ask is: If you’re preapproved somewhere and they won’t guarantee your closing, why will they not guarantee your closing? All they have to do is gather your documents and know that it’s going to close. The only thing this does not apply to is what’s called a USDA loan. It’s a 100% loan with no down payment. When I first started doing USDA loans, my manager said, “Hey, this is a good loan for first time home buyers. You really need to study this and get to know it.” I was like, “USDA. I thought that was the good meat at Winn Dixie.” He said, “Yes, it’s the same people, but this is the mortgage division.” It doesn’t apply to USDA and the only reason is USDA is a government entity and they control when they release the money for that program. If we don’t have control of that piece we can’t guarantee that. In that 22 offer situation for the FBI agent, she won the bid with a lower offer than one of the other offers because she was guaranteed to close and the other one was just a black and white sheet of paper, a preapproval letter.
Scott Stearns: We’re winning deals for our clients and our realtor partners by guaranteeing the closing. Again, I say if you’re already preapproved and your lender won’t guarantee… You should say, “Do you guarantee that this will close?” And they can’t guarantee that then you need to call me.
Glyna: That’s a good tip. That’s a very good tip!
Scott Stearns: Exactly.
Glyna: We have some more tips for people too that we want to ask you about. I know you’ve seen everything in the industry. You’ve been in it 19 years, but what are some of the tips you can share with homeowners when they’re purchasing a new home, maybe a couple of things that you run into all the time?
Scott Stearns: The number one thing I run into, and it’s just a sign of our technology age, people sit in their comfy chair or they prop up in the bed with their tablet and they get on the internet and they look at houses and they look at cars that way too now. But they find the house that they fall in love with, they call the real estate agent. They want to go look at it and they’ve never even been preapproved for a loan, they don’t have a budget, they don’t even know if they can afford that home. They get their heart involved in looking at that home and want to go see it. Now, what’s happened with these multiple-offer situations the listing agent that’s going to show them the home won’t even let them make an appointment if they haven’t already been preapproved. It’s kind of, it’s always felt to me like the public did this transaction backward. They found the house first and then they come and find out if they can qualify for it or not. I would say apply first and get your budget together. The scary thing is most people don’t have a budget at all. I’m talking about a written down budget to know what their bills are. They just, the money comes in, they write their bills and whatever’s left they spend. Do your application first, because another thing is we constantly find things on peoples credit report, not to scare anyone, but we find something on peoples credit report that they didn’t even know was there, that the creditor never called them, they just report it to the Credit Bureau, and so when we do that first it gives us time to make those adjustments and get the credit score as high as it can be, which in turn equals the lowest interest rate that you can qualify for. I just really encourage, call your mortgage lender first, get preapproved, and then we’ve worked with all the best real estate agents over all these years, so depending on what area of town you’re working in, we can refer you out to the best, and if you already know someone that’s perfectly fine. We’ll work with anyone. It just, it calms down the situation if you get preapproved first, you know exactly what your numbers are going to be. One of the biggest shock factors is when somebody goes to new construction development and the taxes are double the first year because it’s never been homesteaded.
Glyna: Yeah, wow.
Scott Stearns: They’re thinking on these online calculators that the payment’s going to be this, and it could be $100 more, it could be two or $300 more the first year until their homestead exemption kicks in.
Glyna: So, save yourself some heartache, get preapproved.
Sarah: Be prepared. Okay, so let’s talk more about tips when it comes to your credit score and credit repair. This is a really good one that we want to make sure we cover. Okay, so you mentioned that the credit score systems out there like Credit Karma, they’re not kind of common sense like people would think that they are.
Scott Stearns: No.
Sarah: I kind of want to give you a two-part question here. What do you mean by that with kind of going online and looking at your credit score and how that’s not necessarily what you should go off of? And then additionally, do you have tools that could help somebody if they do have bad credit so that they’re not afraid that, “Okay, it’s donezo for me,” to help them get in the right way where they can qualify for a home.
Scott Stearns: Right. Okay, good. I like donezo. I’m going to use that from now on.
Scott Stearns: Yes. We’re just donezo. Perfect question for Credit Karma. A lot of people look at Credit Karma these days. Credit Karma does a lot of advertising, so they’re well known. What people do not realize is that Credit Karma is not a lender. Credit Karma is a monitoring service, so if for example before COVID people would come into my office and they would show me their phone and they say, “Here’s my credit score right here. Why are you giving me a lower credit score on the mortgage report?” And so I have to explain to them that Credit Karma is a monitoring service and that score may only be reflecting one bureau, maybe Experian only if you’re looking at a car loan. Even if it did show all three scores, Credit Karma not being a lender, their score is to show you if someone has stolen your identity or if … What your balances are if you’re working on paying some things down. It helps you keep up with what your balances are. Credit Karma is not making a lending decision to give you hundreds of thousands of dollars to buy a home. The scores are completely different and the credit score model, it’s just an algorithm in a computer system. It’s not the Wizard of Oz behind the curtain passing judgment on people. It’s weighed out differently. When you’re looking at your credit score, as you said, a lot of times its not common sense. People don’t realize if they don’t do this every day, 35% of your total score is made up of just-do you make your payments on time or not? If you’ve … And they look at the last 12 months of what is the activity of the last 12 months. You could make on-time payments for ten years and miss a payment this year and this year is what’s happening now when you’re trying to borrow money, not what happened ten years ago.
Scott Stearns: Another 30% of your score is made up of how much is your balance compared to the limit. If the balance and the limit are like this and you’re maxed out, you can make all your payments on time and your score will be bad because you’re maxed out. In the algorithm, it shows they’re not utilizing credit properly, so that effects the score, runs up a red flag, and says, “Okay, they’re spending all this interest on a credit card at 18 or 20% or whatever, I guess in a way they’re saying, “They’re spending more money than they make,” because why would you do that? Why would you pay extra interest on that if you did not have a budget, were not disciplined, and you’re paying more interest on money like that? You can even make on-time payments and have maxed out accounts and have a bad credit score. The guideline on that is your balance to limit ratio needs to be 35% or below, so for easy math if you have a $1,000 credit limit on a credit card don’t run that balance up over $350. After that 35% threshold is eclipsed, then the algorithm starts grading that as a maxed-out account, and your score starts going down.
Glyna: Good tip. Really good tip.
Scott Stearns: Then, if you use credit, credit is supposed to be for convenience, not for debt. Making a plane reservation, making a car reservation, ordering online or whatever, use it that way for convenience, and then when the bill comes in, pay it off. Then, you use it for convenience and you never the dime in interest.
Glyna: Got it. Perfect. All right, so we get through all of this stuff, and then people are so excited. We’re buying a home, but what are some red flags that potential home buyers-
Sarah: We need Kelsi to bring up her red flag.
Glyna: Where’s your red flag, Kelsi.
Sarah: Kelsi, red flag, red flag, red flag.
Scott Stearns: All I have is a mask. A black mask.
Glyna: What are black masks? But that can hurt their process. Give them some tips as to, “Don’t do this.”
Scott Stearns: Yes, so the first thing, when … This is a segway into your question. The first thing when people call me or a realtor calls me and said, “I’m not getting any response from this lender. They’ve already preapproved them, but now they’re … We can’t get them to call us back or whatever,” and they don’t want to come to me for a second opinion, because they’re going to get their credit pulled again and their credit score’s going to get dinged. That’s the phrase, “Get their credit score dinged.” So what they don’t realize is that now, over six years ago the credit bureaus worked into their scoring model finally something that was common sense and if you’re applying for a mortgage you can apply to four different mortgage companies within a 30 day period and that first credit pull is the only one that counts on your score.
Glyna: Got it.
Scott Stearns: That credit pull is the only one that counts. They could come to me, they’ve already had the first credit pull. Mine is a no-cost, no-obligation second opinion to let them know they’re getting the best interest rate or not or they’re getting the best service or they’re getting thrown five pages of cost sheets instead of a video that explains everything. When you’re looking for a lender you’re not just looking for the lowest rate. You’re looking for, “Is this guy going to get me to the finish line and get my family in the house.” There are situations if you’re putting the minimum down payment that the lowest rate is not the best deal. That sounds weird, but I can show you on paper and the numbers don’t lie, but that’s a different story. Some of the things that they don’t want to do before or in the middle of a mortgage transaction is they don’t want to apply for new credit anywhere. Once I’ve worked up their preapproval that’s based on what it looks like that day. A lot of times they’ll get excited. And we have disclosure forms that say, “Don’t do this,” but they want to go ahead and go to the furniture store and when you go to the furniture store they have a deal for you every time. Every time. And you go in there and you buy $25,000 worth of furniture, but you don’t have to make any payments for two years. Guess what that is? That is a credit pull from a non-mortgage lender, that is a new debt that we have to calculate even though they’re not requiring a monthly payment. We have to calculate what that payment’s going to be because we know it’s coming, so we’re not going to put you in a house and put you in a bind with student loans that are coming out of deferment or furniture store credit. Then, if you don’t pay that off in 24 months, that interest from that furniture store retros back to the very first day you applied for it, 24 months ago, and they tack that interest on and then you start making your payments. People don’t just look at the fine print and the fast talk, but that will kill your credit score, it’ll kill your debt ratio. The biggest thing that I see and I have had clients that went ahead and bought something. I had a guy buy a Harley Davidson about ten years ago, $35,000 Harley Davidson, $389 a month payment. His debt ratio went too high. He could not afford the house anymore, and we were in the middle of a contract. I guess he’s sleeping on that motorcycle under a bridge somewhere, but he got his motorcycle but he didn’t get his house.
Scott Stearns: That’s what I see the most is people … One month ago or two months ago buy a brand new car, they’ve got a credit pull and they’ve got now a 30 or 40 or $50,000 balance of a car and a six or seven or $800 … I’ve seen up to $1200 a month payments on car loans. Now they’ve got a brand new, shiny car, and instead of the $400,000 house that they were looking at, and that car would look really good in the driveway they can qualify for a $200,000 house-
Scott Stearns: And they’re not satisfied with that. It’s just being smart and not being … It’s really hard because our society has become an impulse-purchase society and we swipe our credit card and we pay for it later. We’re an immediate gratification society. We don’t work for it like our grandparents did. We don’t work and save for 15 years before we have 20% for a down payment to buy a house. It’s just different these days. That’s what I see the most. And then the last thing I would say is: Sometimes you’re buying your first home. Your parents or your grandparents say, “Hey, we want to give you a gift and help you buy your first home,” so they give you $20,000 or $15,000 or whatever. Don’t put that money in your bank because that’s what’s called a non-payroll deposit. Then, we have to prove a paper trail of where that money came from. If they got it out of their coffee can in their safe or whatever, it’s cash and it’s not traceable, so as far as we’re concerned we don’t know if you robbed a bank last night, we don’t know if you got a signature loan for $10,000 and now there’s another debt out there with a payment on it, and unsecured funds cannot be down payment funds for a mortgage. You can’t get a cash advance from a credit card, for example. A gift is totally acceptable with the proper paper trail. What we do is say, “Hold onto that gift,” and we prompt these conversations so we don’t get hit with surprises and this money comes into people’s account all of a sudden. We say, “Hold, let your grandparents hold onto that money. We’ll have them send that money directly to the attorney’s office the day before the closing. It doesn’t have to go through your account. We don’t have to get a new, updated statement showing that now you have the money, and now here’s where you’re sending it. It just really cleans up the transactions far as the paper trail goes. We just make a gift letter and let them sign it and it shows where the money came from, and that’s perfectly acceptable, but don’t put the money in your bank account before we talk.
Glyna: Got it. Wow.
Kelsi: That’s really great advice.
Glyna: Good stuff.
Kelsi: All right, there’s an ant on my desk. What? That’s great. Sorry, that surprised me! What other benefits does-
Scott Stearns: Is that a question? I don’t know how to help you with that one.
Sarah: He’s like I don’t have an ant question on here.
Kelsi: That’s what I get for having snacks in the office. All right, so can you tell us what other benefits, MortgageBanc offers that many other lenders may not?
Scott Stearns: The closing guarantee is the number one. I’ve not run into another lender that guarantees their closing. That pretty much sums it up. We talked a little bit earlier about we’re a direct correspondent lender to Fannie Mae and Freddie Mac. What that does for us to provide to our clients is it provides lower interest rates, it provides quicker turn times, and it provides less paperwork and documentation required because when a broker takes their loan and they go through another lender and then they access Fannie Mae, that other lender is going to put … Instead of Fannie Mae’s minimum requirement they’re going to put an overlay and say for example, “Okay, Fannie Mae’s lowest score is 600 to qualify,” but that lender knows that doesn’t perform well, so we’re going to say, “A minimum of 640 and we need two years tax returns instead of one year of tax returns,” and we need whatever. It just saves time and paperwork and saves money on the interest rate and the overlays.
Kelsi: No middleman. That’s huge.
Scott Stearns: It cuts out the middleman, that’s exactly it.
Glyna: Wow. All right, so Scott you’ve helped a lot of families. I always love to hear your running total. Do you have any idea where you’re at right now as far as how many families you’ve helped?
Scott Stearns: Yes. A couple of years ago when we were in a business group together, Glyna, my number was running around 1200 and today I’m up to over 1600 and it keeps counting. A lot of people in this industry measure their success on how many millions of dollars of loans can I do. Me and my team we’ve always focused on families because the family’s important to me. Instead of a loan number or a property address, we always talk to the families or the attorneys or the realtors with Mr. Smith or Miss Jones or whoever as a family. When I serve that many families, that’s not saying, “Hey, look at me. I’m doing so many millions of dollars of business or whatever.” If I serve families, we measure units instead of dollars. That unit is closing. Well, that unit to me represents a family unit. Then, I can’t control when they come into my office or online app or whatever, if they’re going to buy, if they’re first time home buyers and they’re buying a $100,000 house or if they’re moving to the lake and they’re buying the $600,000 house. I can’t control that. But I can control the level of service I give to that family. Then, if this guy’s buying a $100,000 house, then five years from now he sells and moves up and he comes back to me. On the bottom of our business cards it says, our motto is, “Creating clients for life.” It’s not one and done. It’s not donezo, Sarah. When we-
Sarah: See, it’s catchy. Catchy, isn’t it?
Scott Stearns: When we finish their loan we’re not done. We’re their mortgage partner for life.
Kelsi: That’s awesome.
Glyna: That’s great.
Scott Stearns: I’ve done a lot of family members loans. Oh, sorry. Did I do something wrong?
Sarah: No, I just want to mention how you can contact Scott aka “Big Daddy”.
Scott Stearns: I think I know where that came from.
Glyna: We’ve been hacked.
Kelsi: Somebody hacked our banner.
Sarah: No, I didn’t see Big daddy on your business card, but we want to make sure that we put it out here now.
Scott Stearns: It’s on the back, Sarah. I think I know where that came from.
Sarah: Okay, so we’re going to wrap this up here. I want to make sure we get your contact information out there so if you do want to contact Scott you can reach him directly at 205-908-6693.
Scott Stearns: That’s, a correction. Actually, it’s 6993.
Sarah: Oh boy.
Scott Stearns: You were so excited about the Big Daddy part.
Sarah: Did I say it wrong or is it wrong in there?
Scott Stearns: It’s wrong on the screen?
Glyna: Yeah, change the banner. Let’s run it again.
Sarah: You got it, Kelsi.
Kelsi: There we go.
Scott Stearns: There it is.
Glyna: For our podcast people-
Sarah: Redo, redo! That first number might actually go to a big daddy and you want to reach Scott. If you want to reach Scott let’s call him at 205-908-6993. That’s 6993. So we have had a great time and we want to point out that we are not done yet here. Gosh, I’ve got to get that thing off, sorry. I can’t do two things at once. I’m trying to get that ticker off and talk. We’re not done yet. Next week we’re going to have a part two, but we’re going to talk about reverse mortgages because that’s another really, really great topic so we wanted to save some more time for that. Is there anything else you wanted to cover, or we’re going to move into the hot seat?
Scott Stearns: Well, thank you for segwaying into the reverse mortgage. What I would say is anyone that’s on watching or sees this on Facebook later, a reverse mortgage is completely different than it used to be. HUD and FHA have come into that program back in 2013 and revamped it. It’s fully insured. It’s called a non-recourse loan now, so the individual or the family or the heirs do not owe the debt. The property owes the debt. You never sign over your title and deed. The key to anyone that would want to tune into that next week is: Are you 62 or older? And are you still making a mortgage payment?
Kelsi: Yeah, or are your parents?
Glyna: Or are you trying to help your parents? Which I know that pertains to a lot of people too.
Scott Stearns: Absolutely. Yeah.
Kelsi: Come back next week!
Scott Stearns: I’ve been on the hot seat for an hour. What is this?
Sarah: I know, right.
Kelsi: Got one more minute, Scott.
Scott Stearns: I’m donezo here!
Sarah: We’re going to take it to another level now. Here’s the hot seat.
Kelsi: Oh, I was dancing. Let me get the wheel.
Sarah: Oh, okay. Kelsi’s got the wheel, she’s going to spin it. Let’s see what it lands on.
Kelsi: What’s it going to be?
Glyna: Spin again. We’ve done this or that three weeks in a row.
Sarah: I won’t have it. Oh, goodie. Famous Quotes!
Glyna: Yay, we’ve never done this one before. How exciting.
Sarah: Okay. I’m excited and I think, Scott you’re going to be the perfect, perfect guest for it. Okay, so in 60 seconds I’m going to read famous movie quotes and you have to give me the movie title it’s associated with, okay?
Scott Stearns: Okay. These are from the ’80s, right?
Sarah: They’re all 2020 and they’re all Disney films.
Scott Stearns: Nice.
Sarah: Okay, let me know when you’re ready.
Scott Stearns: I’m as ready as I can be.
Sarah: Okay. Number one. “I’m going to make him an offer he can’t refuse.”
Scott Stearns: Pass.
Sarah: “I see dead people.”
Scott Stearns: Oh, that is the Bruce Willis movie. Do I have to say the title? Sixth Sense.
Sarah: Got it. “If you build it he will come.”
Scott Stearns: Field of Dreams.
Sarah: Yes. “There’s no crying in baseball.”
Scott Stearns: The movie with the girls that play baseball.
Sarah: Got it. League of Their Own.
Glyna: That’s close enough.
Scott Stearns: League of Their Own.
Sarah: Yes. “You can’t handle the truth.”
Scott Stearns: That is, I know that’s Jack Nicholson. It’s not Officer and a Gentleman. It’s the other one.
Sarah: That’s close. A Few Good Men.
Scott Stearns: That’s what I said.
Sarah: Yeah, I knew you did. It was right there. “I am serious, and don’t call me Shirley.”
Scott Stearns: That sounds like Dumb and Dumber.
Sarah: The movie, Airplane. Do you remember that movie, Airplane?
Scott Stearns: Oh yes.
Glyna: Those are kind of hard.
Kelsi: Those were kind of hard. I only knew like three of them.
Scott Stearns: I need a … If we do the wheel next week, remind me so I can have a second cup of coffee ready before we do that.
Glyna: Yeah, you’ve got to build up for the wheel. That’s for sure.
Sarah: You have to be prepared.
Glyna: Well, and now I’m choked. I can’t talk. Scott, we really appreciate you coming on and I know that it’s so much great information for everybody and they need it before they go buy a house. That’s for sure. We really appreciate it. We had a lot of fun, but we’re really excited about next week too. Want to thank everybody for tuning in and as always don’t forget about our Marketing Mix on Tuesday morning at eight, and we’ll be back with Scott for part two and talking about reverse mortgages next Friday at 8:00. We will see everybody then.
Scott Stearns: Thank you all.
Sarah: See you all. Thank you for watching. Bye.