Transcript:
Welcome back to Financial Foundations, brought to you by Base Wealth Management where we are the foundation to your financial plan. I’m your host, Dustin Taylor.
And I’m your co-host, Kyle Howell, financial advisor at Base Wealth Management out of the Leipzig office.
And today we have our first guest, Jennifer Wile. She is with Riverview Mortgage, and she’s been in the mortgage industry since 1996. And she has joined us today to talk about mortgages and how they can affect your financial plan or where they fit into your financial plan. Thank you for joining us, Jennifer.
Thank you for having me.
Jennifer, as a longstanding member of the Riverview Mortgage family, can you tell us how you got into the mortgage industry?
Sure. In the late ’90s, my oldest brother, Sean, actually got all of us sisters involved in the mortgages. Two of us originate and two of us process, and then my youngest brother recently joined us about 10 years ago when the other brothers stepped out. So we are a family owned and operated business.
I know that you ha- you work with Riverview Mortgage, but you also have Jen Is My Home Girl as like a personal brand. Can you talk about that a bit?
Since it is a family business, my sister and her husband were very well-populated in the Riverview chamber as well, so everybody thinks of them for Riverview Mortgage. Plus, it seemed to hogtie us just to, uh, Riverview, where I can do the whole state of Florida. So I’ve personalized my website to Jen Is My Home Girl. It’s easy to remember, easy to find me, and I can do all of Florida, so it’s not specific to just a city.
So, Jennifer, at Base Wealth, we try to emphasize, you know, paying the least amount of interest on many different types of loans. How do you, how do you help first-time homebuyers with getting into the mortgage process and trying to secure the lowest rate for them?
Um, we like to educate the first-time homebuyers, well, all our buyers, about the different programs that are available to get them in so they’re not biting off more than they can chew, but also to ensure that they are properly out there shopping for something within their price range, to make them aware of any changes that’ll come up and possible expenses, taxes that might alter, insurance and everything like that. So we like to educate and become their partner throughout the whole process. We keep an eye on the rates so that when the rates do dip and we can help save them some money, we make them aware of that as well.
Yeah, taxes can definitely be a big thing, you know, when they’re, when they’re changing over hands, you know, as far as the property is concerned. I’ve seen that in the past where there may be a two or three thousand dollar tax bill that turns into a four or five thousand dollar tax bill, and that’s not necessarily in the mortgage. So they have to, you know, come out of pocket later on, right?
Yes, escrow shortages are a big issue. If you buy from a new builder that was only paying taxes on the land or if you buy from somebody who’s been in a home for 10 years, 15 years, that homestead exemption has saved them from the jump. Um, so we like to look at what the tax estimator is too, so everybody’s fully aware of what the taxes can go up to so we can prevent that shortage and their payment doubling sometimes.
When, when mortgage rates are higher than a borrower’s existing loan, what factors should they consider when they are deciding between consolidation, term reduction, or staying put?
We have multiple options. So we started doing equity lines because the rates are so much higher than the people that have done in the past kinda thing. So we look at the option of a home equity line, then we look at the consolidation of everything altogether. So we give them some options to see which way is the best way to do that for them.
So Jen, you’re, you’re all about open communication with, with your clients. How do you involve financial planners when you’re talking to people about their mortgages?
Generally, a lot of my refinance people have not had a financial advisor. So once we see what we can save them and everything, I like to do an introduction or refer them for budget counseling, which I used to do as well. But just to put them on a plan where we’re not only saving a monthly, but that they’re saving for the rainy day funds for their retirement and everything. So that’s a perfect time for me to actually introduce them to a financial planner, because most of those people are not working with somebody already.
So Kyle, how do you like to work with mortgage lenders after the, the loan’s done?
Well, I think the, the best thing that we can do as, you know, kind of referral partners is making sure that once that new mortgage is closed and the, the client is seeing that, you know, they’re saving, you know, a few hundred dollars a month, is making sure that we’re investing that money for the future and not just spending it because we’re saving it now, right? I think that’s the best way that, that we can introduce, you know, our clients to each other, is making sure that we’re, we’re following along those lines of, of savings and not spending.
Why shouldn’t you refinance just to roll your debts into one, and when might it be okay?
Depending on the debts and the amount of debt that you’re looking at, sometimes refinancing for debt consolidation doesn’t make as much sense as either looking at a possible equity line or even a smaller loan or a line of credit that allows people to save money without having to go through all the closing costs and everything. With rates higher right now, if you have a two, three, four percent rate on the first mortgage, there’s no reason to really refinance all of that to get the lower interest or monthly payment when we can possibly consolidate in another way or just put you on a budget that you would work with your financial advisor to really grow your savings all together.
So Jen, yeah, I’ve r- I’ve referred you, you know, uh, a couple of clients trying to refinance, you know, some debts. But because they did have, you know, a lower, much lower interest rate on their first mortgage, we decided, you know, an equity line was, was definitely better. I think they went, you know, from $1,500 in credit card debt, or credit card payments, down to about $1,200 and it saved them quite a bit of i- uh, quite a bit of interest, you know, over the years. So that was fantastic that you were able to help them out.
How would you both coach clients to invest those savings without jeopardizing their budget?
Well, I typically use our budgeting software. We link all of your accounts and make sure that you’re staying within budget, as well as being able to put money away for the future. So that extra savings they’re getting from refinancing potential, you know, higher interest rate debts, we’re now able to focus those dollars more towards their savings and investing for the future.
I definitely agree with that. I mean, I have an emergency savings fund plus actually investing, especially if you’re self-employed. I know I started mine late in life, so I’m grateful for the budget plan that Kyle has, just to have me see a window into my future and see how great the skies are or how sunny I can make it kinda thing, so.
So Jen, from Base Wealth’s perspective, there, there’s a lot of…… interest rate cycling going on right now. Um, we’ve seen interest rates spike over the last two, three years. What indicators are you guys looking at to lock in, you know, at the lowest point here?
We do watch the bond market ’cause that affects our rates the most. Um, but we… What we will do is, our CRM also focuses on what interest rates are up above where they are currently so we can reach out to customers. We also get notifications when possibly losing PMI by refinancing. So, we take all of those into consideration to see what we can do for the client and to see if it makes enough savings there. If it doesn’t, my advice is always to tell them to put it on hold until hand. If there’s equity, we can always look at that option just to consolidate some of the debt. But it has to make sense. I don’t do it just to turn a loan. I want to make sure it’s putting them up in the right position for the future.
Putting clients first, I love it.
Okay. You’ve volunteered as a budget counselor for Bay Life Church. What lessons did you learn while doing that that you’ve carried over into what you do now?
The change in income for some… Like, I used to get a lot of teachers, and teachers get paid usually nine months out of the year. So, during the summer, they would end up building up their debt again. Or self-employed people that just… You know, you have a good month and you go celebrate, but then you have a bad month and you need some help. So, really having a written budget, I realized a lot of people don’t realize what they’re spending in different categories until it’s written down on paper. I know even being a financial background, Kyle’s budget thing was an eye-opener for me on spending, like, whether it was eating out, networking, or this or that. Things I wa- I wasn’t even paying attention to. So, I think it’s really good to have that background and a written budget where you know where you’re spending and you’re feeling comfortable with where you are at the end of the month.
Yeah. And everybody has, you know, a different way of doing things. And I’ve met plenty of people that, you know, keep track of their budget on the spreadsheet and they try to categorize and color coordinate things. And some people use envelopes and use cash. And then other people, you know, like software. And, you know, that’s what, that’s what we offer is the software program and being able to link all of your sa- all of your spending together. And obviously you can see. You’ve, you’ve used it. And you can see how it works, so. So Jen, how do you, how do you help clients with their long-term savings, paying off their loans sooner rather than later?
Generally, especially with first-time home buyers, I will put most people in a 30-year mortgage, even if the 15-year… Well, right now, they’re about the same interest rate anyway. So, a 30-year gives more flexibility. But I do educate them on how much extra that they can put towards principal to knock off a whole bunch of savings and interest. And the earlier they do that in the process, the more savings that they get. For example, I did, uh, amortization schedules on $100,000 at 6.5%, which is close to where we’re at right now. Principal and interest was $632 a month, but they would pay $127,000 in interest over that 30-year. Whereas if they took a twelfth of that payment, so an extra $50 or so a month, they would knock 70 months off of their mortgage and save $29,000 in interest. And that’s just $50 a month going to it. So, I run those numbers for them. If they’re even more aggressive with $113 extra a month, they can knock it out to a 20-year, saving $48,600. And on a 15-year with $239 extra a month, they can knock off $70,000 in interest. So, that’s less than half of what they would be if they just prepaid or paid like a normal mortgage. So, if they have the budget and the ability or a raise, I do show them that. As long as they’re also saving for, you know, possible escrow shortages or changes with insurance or life happening. And that’s where their financial advisor comes into play with it, too.
Yeah, that’s definitely huge. It’s definitely a conversation that, that we would wanna have with those clients. And making sure that, first of all, they can afford that extra little bit, you know, to go towards principal but making sure they’re also putting money towards their future, too. I- I- I love the amortization schedule and being able to show, you know, people, “Here’s, here, there’s a lot of savings there if you pay a little bit extra. But we also have to make sure that you’re saving for the future at the same time.”
Would you also take a look at what it would be like if you took that money out and didn’t pay the loan down early at all, but just invested all of it rather than a portion, and what the returns might be, uh, looking over, over time? ‘Cause that’s a possibility as well.
Yeah, we’ve- we’ve definitely taken a look at that. Making sure that we’re, first of all, allocating those monies correctly, you know, for the future, and we’re not taking on too much risk with those particular funds. Because we don’t wanna be losing value in a down market like we’ve seen recently. But we definitely want to grow that money over time. We just gotta make sure that we’re getting a better return than what the interest rate is that they’re saving, you know, to capture that arbitrage, so to speak.
And also, like, paying off your big debt earlier is probably a big, like, emotional win for people. So, I’m sure that you coach people through that as well.
Yeah. Obviously, the, the, the best part of going into retirement is being debt-free. So, you know, we wanna try and focus on paying down, you know, the biggest loan before we get there, obviously. And then, you know, making sure that we’re staying out of, staying out of debt while we’re there in, in retirement.
Jennifer, high-net-worth clients often consider jumbo loans. Can you explain what that is really quick?
Sure. For the local counties that were near Hillsborough, Pasco County, any loan amount over 8065 is considered a jumbo loan. Jumbo loans are gonna generally require more money down. They’re gonna require a better credit score as well. The, the rate can be higher on a jumbo loan. So, sometimes we’ll look at doing a conforming loan limit under 8065 and a possible second mortgage, depending on the equity that they’re gonna have in it to avoid that higher interest rate. So, we take each situation individually because each client’s gonna be a little bit different. But we can help them through that process.
So, what would be, like, an unacceptable credit score for someone who’s trying to get one of these jumbo loans?
Jumbo loans generally wanna see a 700 or higher credit score. Even conforming our conventional loans, we need usually over a 620 credit score. So if we have somebody that comes in that’s sitting 580… I had one call for 440… we’d do more of a credit track and help them build up their credit to where it needs to be in order to be able to qualify them. I have lots of people that were pre-approved, but they stay in the system for a while, just trying to get those scores up so we can offer a better product and everything. Sometimes you might wanna buy right now, but it might not be the right time to buy or to refinance. So before you let all those debts accumulate and your interest sc- or credit score goes down, you definitely wanna act before that happens. Or when it is already happened, we like to educate so that people can get in a better position. Every 20 points, basically, makes a difference on what your interest rate’s gonna be for the rest of the mortgage, kinda thing. So credit score is definitely a vital role in the process kinda thing.
So if someone wanted to purchase an inve- an investment property that was, I don’t know, a million dollars, and their credit score was too low, you could help get them on track where they… You know, maybe they miss out on that investment property, but later on they would be able to qualify for that- that one million dollar loan.
Well, they could, if it’s that kind of situation ’cause exactly… I’ve seen a lot of people that make really good money, but they’re very bad at budgeting and everything. It would be somebody that would be definitely an introduction to my financial advisor to help get them on track. So not only are they saving up the reserves needed to buy that investment property, but they’re also paying their bills on time and everything to get the scores up. If you’re making that good of money, there isn’t a reason, other than a shopping habit or something like that, that should keep you down on the credit scores. It’s just a matter of lining it all up correctly.
So Jen, what are some of the common surprises that a lot of first-time home buyers encounter that could potentially be pitfalls later on down the road?
Generally, when you’re purchasing, we’re doing 30-year fixed, so your principal and interest is pretty steady. Well, it’s mandated already, kinda thing. Escrow shortages have been a big issue lately, especially with property taxes going up, homeowners’ ins- insurance going up after hurricanes and such. So when there’s an escrow shortage, your payment not only has to make up that shortage, but it also has to double that shortage for… Temporarily in order to get back in line. So I have seen that become a big, huge pitfall for people. We try to make sure everybody files for homestead exemption, so the… In January of each year, we reach out to all our past clients to make sure that they are filing that. Helping them if need be, kinda thing, just to get that done and so that goes into effect. And then I always tell people to shop their insurance. I have a gentleman that just closed at, um… That his insurance was $7,200 a year. While we were refinancing him, I had him look at it with my insurance agent. She ended up saving them $3,000 a year, so that’s 250 a month just savings, just on insurance. So don’t set it and forget it when it comes to your mortgage. Review things. Keep an eye on your tax bill so you know what’s coming up, and then check your insurance each year for renewal. See if we can save you money that way.
From my own personal experience, I know that, especially with the new construction, the closing costs are- are pretty outrageous. Uh, so that was- that was a- a big surprise. I mean, I was prepared for it a bit, but they definitely were even higher than I- than I thought. So- so that’s one. Is there anything else sort of like that? You could also maybe mention some pitfalls for small business owners that- that are trying to buy their first home, because d- I- I ran into issues there too.
Well, first of all, with the closing cost thing, I would always tell people to check and see if you are paying points. Um, points are not necessary on a loan, and points generally take a long time to recoup. I have one lady right now, it would cost her $600 to get a quarter lower on the interest rate, but it would take her two and a half years to save that money, where she could put that money towards the principal and probably have a bigger savings over the loan, kinda thing. For self-employed, we do have a lot of non-qualified mortgages, non-QM, which allows us to do bank statements or other options for financing so that we can get those self-employed. We all know self-employed like to write off everything that they can, but what you tell Uncle Sam is what Aunt Fanny and Uncle Freddy believe you made too. So, you know, we have to get creative sometime with the financing, but we can do bank statement loans or profit and loss statements. We can even do investor loans with just the debt service coverage ratio, which means that they’re qualifying off the rental income that’s coming into the property, and we don’t even get into their income. So there’s options out there, but we have to check. The less they show, the higher the rate you’re gonna pay, so you have to be prepared that if you don’t wanna tell Uncle Sam what you made, then, you know, you’re gonna pay a little bit more each month for it. But we have to average what’s best for them, kinda thing, and it’s definitely a personal thing.
Sole proprietor to an LLC, and there’s that two-year rule, so that could be… You know, throw some red flags. I- I had that issue as well.
Yes. Or people that go from W-2 to 1099, it starts all over, the time clock all over again. So there are some programs, the more lenient the programs are gonna be, the higher you’re gonna pay for the interest rate. So I usually tell self-employed people, if you’re planning on buying in the near future, claim all your income on the taxes and stuff like that. They don’t like to see edited tax returns or anything like that. So, you know, show what you’re making and everything, and we’ll show you how much you could qualify for. I do not work backwards where people tell me, “How can you tell me how much I should claim for income to qualify?” It does not work that way, so… But I would just advise them to, you know, write off as little as- expenses as possible or whatever, ’cause if we can go full documentation, it’s gonna get you the better interest rate and savings over the life of the loan.
At Base Wealth, we often look at debt as part of the holistic plan. If I send a client your way to do a mortgage, what recommendations are you gonna make to them to make sure that we’re complementing and not competing with each other.
Definitely any referral that comes to me, I wanna make sure and respect the person that referred the referral over. If the client is actually comfortable enough with, I like to keep the financial advisor involved in the process. So if there was ever a conflict or advice that they would counsel. I know mortgages, but they know their finances and their investments better. So they could tell me if it’s a good fit for them, if it’s whether, uh, rather shortening a term or like with the rates being so similar on a 30/15, if it’s doing longer. But they’ll know the self-discipline of that client better than I do, so I would keep them in the loop and everything just to make sure that we’re being friendly with each other and everything. So…
So you collaborate with them and, and, and make sure that the plans align?
Yes. I never wanna take anybody off-track. I mean, if they’re already on this goal and everything, especially with their retirement plan, the last thing I wanna do is do anything that alters them from that where they can’t retire in the timeframe that they want to and in the condition that they want to.
Do you have a client success story in which refinancing boosted a client’s wealth trajectory? I would say building the stability and being able to keep a family in their home after either a divorce or a death in the family or medical emergency kind of thing. Sometimes being able to refinance them to getting to where they can maintain that home. I’ve had some where it’s the home’s been passed down to families, so the legacy in building the wealth through real estate, super helpful. So I would say that just getting people through their struggles ’cause life happens kind of thing. So if I can help throughout with the refinance or just budget counseling or equity lines, I can tell you multiple families of, like, young married couples that I’ve been able to help just getting everything out on paper kind of thing, too. So it’s not always just through mortgage, but just having those open communications of things that are actually one of the major stressors in a marriage. Sometimes it’s nice just to get the figures in a open, safe environment to discuss it.
All right. All right, so that pretty much wraps up our insights on mortgages today. Jennifer, for our listeners who may want to reach out for budget-friendly options, what are your, what is your contact information?
Sure, they can check me out at jennismyhomegirl.com. That is, has all of my contact information. My cell phone is 813-399-2737. They’re welcome to call or text me at any time. I’m usually available 8:00 AM to 9:00 PM, except on Sundays. I do try to take a little grace Sunday mornings. But other than that, people can reach me.
All right, and as always, you can visit basewealthmanagement.com for more insights, more podcasts, more blog posts, more videos on financial topics. So make sure you follow our podcast on all your social media channels and send any questions to question@basewealthmanagement.com. I’m your host, Dustin Taylor. And I’m your cohost, Kyle Howe. And happy listening.
