INB Mortgage Lender Stacy Borho Wolak takes pride in her ability to counsel people on how to qualify for a home loan. We recently had a Q&A with Stacy, hoping to share her key pieces of advice for first-time homebuyers.
How does someone prepare financially for homeownership?
You have to have a budget. Be aware of how much of a payment you are comfortable paying each month. Have an idea what your credit looks like. And have 3-5% of the sale price saved in the bank.
What role does credit score play in getting a loan?
Credit score plays a huge role, bigger than what people realize. Credit impacts the mortgage rate you can get for your loan. It can determine what type of loan you’ll be considered for. And if PMI (Private Mortgage Insurance) applies to you, it can affect your PMI percentage.
How do you counsel clients to improve a score?
I do like to see someone’s credit report before counseling, but some big impactors are collections and credit cards with high balances. The magic word with collections is to say, “IF I pay you in full, will you delete this from my credit report?” Getting these payments off your record can be big help. Getting credit cards paid off every month in full really helps credit, too. Credit bureaus are not big fans of unsecured loans, so try and avoid those if you can.
If you do not have a credit score, it only takes around six months to build one. The best way to do this is with a credit card. INB even offers secured credit cards. When you get one, use it for small items like gas or dinner and then pay it in full when bill comes. Just one credit card can do the trick!
What role does income play in homeownership? (Does someone need to have to have a certain income?)
Income is important, too, and stable income. We have to show you have enough income to support your new loan payment and your current debts listed on your credit report. We have helped people with only Social Security income, and we can help people who make a salary. The amount of income just impacts the dollar amount of a new house we can qualify you for.
What is “debt to income” ratio, and is it something you discuss with people?
Debt to Income ratio, or DTI for short, is a ratio we use in qualifying borrowers. We use your gross or before-tax monthly income, and you can go up to on average around 45% of this in total debt. That other debt includes everything reported on your credit report like credit card payments, car loans, student loans and new house payment. So, an example is if you make $4,000 a month, you can only have $1,800 in total monthly payments including the new house payment.
What role does a person’s spending habits have on the ability to afford a home?
Are you a spender or a saver? This can impact credit scores and how much of a home you can buy. It is important to be a saver more than a spender. Homeownership comes with a lot of responsibility. No more calling a landlord if something breaks. Now it will be your bank account the money comes from.
Is use of credit a good or a bad thing when you begin to talk about homeownership?
Use of credit is good in moderation, but bad if you max out your credit cards. If you are thinking of buying a home, you shouldn’t open any new debt from now until after you close unless you consult your loan officer.
When should someone start the pre-qualification process?
If you are thinking of buying, it is great to start sooner than later in case there are any surprises with credit or income. This way you have more time to work on things if needed.
Do you keep in touch with people who come to you but can’t afford a home?
Yes, I do. I will work with them on cleaning up credit and/or collecting additional income documents while waiting to get there. I am happy to help, but most of the work will have to be done by the buyer.
At what point do you say, “Go! Now you’re ready for a home”?
As soon as we have credit in place, down payment saved, and a steady job.
Some people may just be frightened by the huge expense of a home. Do you help them look at the purchase as anything but an expense?
Absolutely. When purchasing a home, you make an investment. There are tax benefits for some. For others, there’s a pride of homeownership.
Is the 2022 housing market affecting your counseling? Have you shifted any of your recommended strategies?
For the last couple years due to low inventory, our strategy has been different. More often than not, we’re in multiple offer situations, so you have to put your best foot forward. We can help calculate payments and see what your max price will be. It’s a huge benefit, too, to work with local bank and to be ahead of your competition.
Stacy’s NMLS # is 689948.