The Reality of Real Estate with Chris and Bri
Brianna Lehman, the Realtor, and Christopher Lynch, the Lender, give a real take on making home ownership attainable. They break down real-life scenarios, trends in the market and give their personal tools to make homeownership not just your dream but your reality.
The Reality of Real Estate with Chris and Bri
From Low Credit Score to Dream Home: Strategies That Work
Ever been curious about what credit scores are actually needed to unlock the door to your dream home? Well, you're about to find out as Chris and Bri break down the ins and outs of credit, from the bare minimums for homebuying to strategies for cultivating an enviable credit profile. This episode is a goldmine for understanding the difference between secured and unsecured debts, the effects of various types of credit inquiries, and how to manage the delicate balance between credit card usage and maintaining a score that'll make lenders swoon.
But wait, there's more! We're not just talking credit scores; we're exploring the profound impact your credit card balance has on those numbers. We dive into real-life blunders that could cost you dearly, like switching service providers without a second thought or closing accounts the wrong way. And for those of you who think a low credit score is a dead end, we provide a glimpse into the sobering reality of scores as low as 357 and how to bounce back. With our guidance, you'll learn how to navigate the credit requirements for various home loan programs and how to play your cards right to secure the keys to your castle.
In our final chapter, we shift gears to the nitty-gritty of homebuying with a less-than-ideal credit score. From down payments to debt-to-income ratios, we lay out the battle plan for improving your financial standing. Plus, we shine a spotlight on local programs that could give credit scores a backseat, focusing more on your income and family size. If you're building towards the goal of homeownership or ready to take the leap, join us to craft a personalized strategy for success. And for more real estate real talk, follow our 'Reality of Real Estate' Instagram and hit us up to share your journey. Toodles!
YouTube: https://www.youtube.com/@LucasLiveMedia
Instagram: https://www.instagram.com/realityofrealestatepodcast/
Email: Brianna Lehman- blehmanrealtor@gmail.com
Email: Christopher Lynch- Christopher.Lynch@ccm.com
Hey everyone, what's going on? Welcome to the Reality of Real Estate podcast. I am one of your hosts, Christopher Lynch, and welcome my co-host.
Speaker 2:Hey everybody, my name is Brianna Lehmann.
Speaker 1:We give you a real take on making home ownership attainable.
Speaker 2:We will be breaking down real life scenarios, trends in the current market and giving you our personal tools to make home ownership not just your dream, but your reality.
Speaker 1:Get ready to be inspired, motivated and ready to take action towards building your own empire.
Speaker 2:Because when you invest in real estate, you aren't just purchasing a home, you're investing in your future. Hey guys, welcome back to the Reality of Real Estate podcast with. Chris and Bri. We are excited to be back this week to talk to you guys about something we, especially Chris, get questions about all of the time what is the lowest credit that we can purchase a home with?
Speaker 1:Yes.
Speaker 2:And how do we build credit? What affects our credit? What is credit?
Speaker 1:And how? Why did you ask that?
Speaker 2:That people ask us that what is credit Fair? And I have questions about my own credit all the time. To you, you know that I'll call and say does this affect my credit? What does this do? How does this look? So?
Speaker 1:Hours are always. Student loans everyone.
Speaker 2:And half of theirs are going to be student loans too. Because for what? How many years did we not have to pay our student loans? And then they just send me a letter that my Three. Yes.
Speaker 1:Was it three?
Speaker 2:Oh yeah, a good friend of ours always says, those student loans are between Joe Biden and God, and I, just I feel that way, I do feel that way.
Speaker 1:Fair. All right, I'll take it.
Speaker 2:Okay. So yeah, how are you today? Before we start.
Speaker 1:Good, how are you?
Speaker 2:I'm good. I was served hot, cold, hot coffee from my favorite place and then had to go get mediocre hot coffee to make me like wake up. So I feel better now.
Speaker 1:But I had coffee at home this morning and I'm just now drinking my Mountain Dew for the day. So that's I'm good.
Speaker 2:That's a lot of, but I did also have like two waters. Okay.
Speaker 1:I think that's like 40 ounces of water.
Speaker 2:We'll talk about water consumption later, because I'm already through my gallon of the day.
Speaker 1:Oh well, yeah, no, you won't see me drinking a gallon of water a day.
Speaker 2:Oh okay, all right, so but yes, talk to us about that, like what are what affects people's credit, what's the lowest credit, and give us a rundown of what credit is for our buyers. Who?
Speaker 1:Okay, so credit, realistically, I would say, the reality is for credit is that, like, you can't buy a lot of things here in the United States without credit. And unfortunately, there are a lot of people who, when they graduate high school, and like, if you, if your parents didn't teach you, unfortunately you, just you don't know any difference, and so when you don't know what you don't know, you either find someone along the way who can teach you or you make some mistakes along the way. And so credit, the easiest way to establish it honestly is going to be with a credit card, a car loan or, unfortunately, in some cases, student loans. But you also have to diversify your credit and by doing so, you need multiple types of debt, and so multiple types of debt and, hopefully, healthy debt. So you're looking at having a good relationship with your credit cards, having a good relationship with any installment debt which is going to be that can be secured or unsecured.
Speaker 1:So, like, if you get a personal loan from, like, your local credit union, that's an unsecured debt. If you get a car loan, that is a secured debt, and so you have to have a healthy relationship with them, making your payments on time and try not to apply for a lot of things in like the year. So that kind of leads into something different there. But which also impacts your credit is that for your inquiries you do not want to have your credit ran typically more than three times a year and, if you can help it, try not to open up more than one to two trade lines a year, and so your trade lines is basically what helps you diversify your credit. So that's your credit cards, your loans, lines of credit, those sorts of things.
Speaker 2:So you don't want a soft or a hard pull.
Speaker 1:It doesn't really matter how many soft pulls you get.
Speaker 2:Okay, so what would be for people like what is a soft pull versus a hard pull and what could?
Speaker 1:So a soft pull is what, honestly, a lot of credit card companies will use when they initially are looking at seeing if you even it's like, if you see something and say, hey, let's see if I qualify, or see if you can pre-qualify nine times out of 10, that is going to be a soft credit pull. It is not going to show up on your credit report. So if you came to me today and I did a hard pull on your credit for a mortgage, I'm not going to see that you had 17 soft pulls with different credit card companies or. But you can also like a hard pool, which is basically where you're going to get that inquiry on your credit and because they'll stay there for two years. So, but a soft pool, no one besides the place who pulled it and you know that it was done.
Speaker 2:Okay.
Speaker 1:So like that is the difference Anytime that you get your credit pool depending on the type of debt that it is that you are in, your intentions are kind of there for sale, Like hey, if I qualify for this, am I going to take advantage of it? So that's what I mean by like, if you get that hard pool, you're going to nine times out of 10, you're moving forward.
Speaker 2:Right.
Speaker 1:And or if you have a soft pool done and then that soft pool turns into a credit card, like if you apply through I don't know, we'll call it ABC Bank for their credit card. They start off with a soft pool and then they say, hey, brianna, you qualify for this $20,000 credit card. And if you say, oh well, yeah, you know, I'm out to just Sign me up. If you take advantage of it, then that turns into a hard credit pool.
Speaker 2:Okay.
Speaker 1:And so the idea behind it is is that if they can kind of pull you in with the soft pool, show you what your options are, you say yes, turns into a hard pool.
Speaker 2:Okay, good to know.
Speaker 1:But it's going to stay on your credit for two years. But, like also, the other side of that is, let's just say here you did say yes to that and they send you the credit card where you never activated. You just wasted a pool.
Speaker 2:Okay.
Speaker 1:So like that doesn't make any sense either.
Speaker 2:Right.
Speaker 1:So, like you just kind of like your intentions with your credit have to be there and, if we're being honest here, treat your credit like you treat any relationship. So it can either be really good or it can be really bad. So it can be healthy and thriving and, just you know, living its best life, or it can be toxic and it's just like I don't really know what's happening here, but you got to treat it however you would want to be treated in a relationship.
Speaker 2:Right.
Speaker 1:So what other questions?
Speaker 2:So what does it look like? What is a healthy relationship with your credit card look like? Does that look like you use it every time you go to the store, max it out like you pay it off every month?
Speaker 1:You're making my heart like race.
Speaker 2:But these are questions that buyers really have, like what is a healthy credit card relationship?
Speaker 1:A real healthy credit card relationship is if you have numerous, like multiple, credit cards. But let's just say here you got that $20,000 one from ABC bank and it allows you to shop wherever.
Speaker 2:Okay.
Speaker 1:But then, in addition to allowing you to shop wherever you get rewards, like so you, you know you get perks, cashback, whatever. Take advantage of it, okay. So, but be smart about it. When you go get gas, you go get groceries Maybe you're that's $20,000 right there. No, these days it actually it might be But-. When you do those things, you have to figure out what is your cycle date and what is your statement date.
Speaker 2:Okay.
Speaker 1:And two very different. Two different things.
Speaker 2:Okay.
Speaker 1:Your cycle date is when it actually is going to report to the credit bureau.
Speaker 1:Your statement date is when your statement is cut. So most credit card companies your cycle date is going to fall somewhere between the 17th and the 21st. So you can call them and you can ask them. But that's how you know when your balance of whatever you currently have is going to technically report on your credit report. So the smart way to play the game is to, whatever your balance is, whatever you used it for, if you can pay that down as low as possible or just pay it off in full every single month. So then that way, when your statement goes out, then you also, at that point in time, you're not paying any interest on that money that you've spent, and then you are then in a position to where it's going to show that you have a healthy relationship with this card. I had an old boss tell me one time that credit cards are like a life insurance policy. On your credit report it can tell you someone's true life expectancy and it tells a creditor how well you value your life.
Speaker 2:Wow.
Speaker 1:And I just I never thought of it that way until she told me that and it kind of just stuck with me to say, all right, well, if you have $100,000 worth of open credit and on a monthly basis, sure you can, we can see that you use it.
Speaker 1:But let's just say here you're only using it gas, groceries, like wherever you shop at, or whatever but you're paying it off. But then you have all these other credit cards that are open, but you use them well, and it basically says that, hey, this person is responsible, like they care, they aren't trying to basically live outside their means, those sorts of things. But I also look at it from the perspective of life happens. So when life happens and if, depending on what you make, can you afford to do whatever it is that you need to do at that point in time without using a credit card, and sometimes that that's what happens, and so when that happens, you have to then basically kind of hit the reset button, discipline yourself to get that balance taken care of, or balances taken care of, and then you're kind of just going ahead and hitting the reset button to where it'll bounce back at some point.
Speaker 2:Okay, so if you don't pay it off every month, let's say what you keep a balance. Okay, so what percentage like? What does that look like? How does it affect your credit? Let's say, if you have high balances on your credit cards each month?
Speaker 1:So here's another key way to look at that is. Let's just say here you have $10,000 in credit card limits.
Speaker 2:Okay.
Speaker 1:Your limits are at 10,000. But you always, you always have a rolling $1,000 balance. That is reporting, okay.
Speaker 2:Okay.
Speaker 1:You're losing automatically roughly somewhere between we'll call it 10 to 15 points on your credit score.
Speaker 2:Wow.
Speaker 1:So anytime that, whether it's a thousand, it's a hundred, whatever it is, think of it, credit cards giving your score or deducting a hundred points away from it. Okay, so if you are are currently sitting at a 650 credit score and but your credit cards are, you have still have that $10,000 limit, but you're sitting at 5,000. Know that in reality, if you took care of that $5,000, your credit score should be basically a 750 to a 752-ish.
Speaker 2:Wow Okay.
Speaker 1:So like.
Speaker 2:I didn't realize that it really impacts it that much to have balances left.
Speaker 1:It's an unsecured debt and the reason why it impacts it that much is because it is like one, any unsecured debt, which is why a lot of people, if you choose to file bankruptcy, you can and you can walk away from it. Compared to a secured debt, it's not always looked at the same, so it's gonna have the weight in there for that. For that reason, because that determines on how you choose to basically have the opportunity to do life next- so what?
Speaker 2:all right. So we talked about, like what credit is credit cards? What is the lowest credit limit?
Speaker 1:Because we have Low credit score.
Speaker 2:That's what I mean. Sorry Credit score. And how, like what do you do that impacts your credit score?
Speaker 1:Not making payments on time, or if you. What like burns my soul, is that where I think a lot of people get misled is that like if you switch cell phone carriers and don't kind of handle things or wrap things up with the previous carrier and then, whether it's your phone or like your final bill, car insurance is the same way, cable bills are the same way. That- Really.
Speaker 1:Yeah, like it will automatically get reported on your credit report as a collection and nine times out of 10, like most people try to dispute it. But all you have to do is just call them and say I moved and I actually never got a copy of my last bill. Or I switched carriers. I still have the same phone and my new carrier said that they were gonna pay this off. But then, like, did the new carrier actually give you a credit to where you would have had enough money because of the credit that they gave you to handle whatever you needed to handle with the previous carrier? So it's like those things that truly make an impact on your credit immediately. Lowest credit score that you actually can have is a 300, or you could call it a zero.
Speaker 2:So like if you Okay, so that's if you have an established credit or you just kind of let your credit go.
Speaker 1:And it doesn't even come up as a zero, it'll just say that no credit established or no factors to calculate a score. But like the lowest credit score I have ever seen is a 357, and it went 357 to a 417 to a 462. So like those are three different scores and but every credit bureau kind of like the how they factor and weigh out different things make a difference. But then you, if you technically pay things on time, you don't open a lot of credit and I shouldn't say don't even open a lot of credit. But if you don't like, if you're not a repeat offender with like hey, I applied for these three credit cards today and I got approved for them, so next month I'm gonna basically apply for four more. You just don't really wanna do that If you can avoid it. But you also, in addition to that, keeping a diverse credit file and that is gonna be like trying to have at least two credit cards if you have, or more, whatever your life looks like.
Speaker 1:But if you can't always try to have some form of an installment debt on there preferably if it is a secured debt and so a car. Like you know, recreational vehicle, a home, those things.
Speaker 2:Okay. So when it pertains to purchasing a home, what does credit look like when it comes to our buyers? Like what is the lowest credit right now with the programs that you offer? Because I've seen it fluctuate over the last few years. Honestly, I've had lenders say that it could be a 550 and then I've had some say like it has to be a 650 for us to be able to qualify them for this program or give them down payment assistance or just anything that even qualify them in general. So what does that look like for you where you are with your programs?
Speaker 1:The lowest score that you can have is gonna be basically a 500. Now that having that 500 score it comes with a lot of demands, so like just right off the bat it's okay. Like they have to have 10% of their own money down, then they have to have at least six months of reserves and you can't have any late payments on any secured debt. Basically, depending on where your debt to income ratios fall, it could be somewhere between like the last 12 to 24 months.
Speaker 1:So like there's just so many things that kind of get factored into that at that credit score but, also like just from the other side of it, can we pull your credit, take a look at it and say like, okay, hey, maybe we can't do something today, but if you do X, y and Z, we can do something in six months, because by taking care of X, y and Z and sometimes maybe it is like that last car insurance bill, so it's like you know $147.
Speaker 2:And paying it off, you know, like hidden things that they didn't even realize when affecting their credit yeah and so like, because they're not gonna send you a bill every single month at that point. No, it's in collections. They don't care at this point.
Speaker 1:And so, like they will call you a few times. If you don't answer, they just kind of move on. So there's that. But then for like, if you're an FHA buyer or VA buyer, truthfully, a 580 is where you need to be. If you are a USDA buyer, like for me, ideally as close to a 620 or higher that you can be like that's where we want you to be.
Speaker 1:Conventional, it really just depends on the overall score, but, truthfully, a 620 or higher. But then a factor in with that is gonna be your down payment and debt to income ratios. So anyone can buy a house. It's whether they can do it today, six months from now, a year from now, what have you. But if we come up with a plan of action pertaining to how do we fix and adjust your credit, it's gonna take discipline and commitment and so I can say that, like I mean I have three clients right now who are just like on it and like the communication is great between myself and them and like they're just committed because they didn't know any better, and so now they started to learn things and they've started to ask the right questions, like and they want to know, and not everyone is gonna take the time from like my side to help them put together a plan.
Speaker 2:Right and which is huge because and we've worked with clients in the past where you've put them on that plan and it was three months from now, and then in three months they're ready because they did it, or we've had clients who didn't do exactly what they needed to do, and three months turns to six months, six months turns to a year. So how does having a higher credit score benefit them?
Speaker 1:These days, it really just is gonna be a benefit. In my personal opinion, it will be a huge benefit always when it factors into interest rates.
Speaker 2:Right.
Speaker 1:To when you're looking at the different type of loan products or program that you wanna take advantage of. So, like, the higher the credit score the better. But then like, but you could also be a perfect credit score which is an 850. And if you don't have the means or the funds to actually like for down payment and closing costs and that stuff, are you do you still need down payment assistance, but, like with an 850 credit score, it's a lot easier for down payment assistance as long as your debt to income ratios are in line. Now, if you are a six truthfully, like I always tell people if we can get your score to like 650 or higher, you can qualify for pretty much any program, like down payment assistance program, and so that'll be a factor.
Speaker 1:But if you don't need it and I have a guy I was talking to a couple of hours ago his middle credit score is a 603, but he has the cash that we need, so, like we're hitting the ground running and so, like I don't, we don't need to wait.
Speaker 1:It might have helped him. But also, like, at that point, if he does everything that we're doing, having a mortgage on his credit, he just got a car loan a couple of months ago. So like, by diversifying it and keeping the healthy relationship, when it comes time to do a refinance, then he can actually take advantage of lower interest rates and those sorts of things and like. And if he wants to look at paying himself back for the money that he's investing into it, now he can, but he's ready to go and he's tired of renting. So it just everyone's situation is so different and like. But there's also local programs like that don't care about credit and they only care about your debt to income ratio and your household income and like your family size. So like, maslin offers a great program and my opinion is like one of the best ones out there and a lot of people do not know that it exists.
Speaker 2:Like a lot of buyers, when they're looking at Maslin they're like what? Or even Kent city has a program too, that a lot of buyers do not know about, and these programs are out there for them to utilize.
Speaker 1:But yes, and so it's just like those two programs, like credit isn't a factor, and so, but do you meet the income guidelines? And then, what about your family size?
Speaker 1:So that's just like those things. But like we always look at and say like hey, like what makes the most sense for you in this point in time in your life Because anytime you buy a house, life can happen and so there's no guarantee that it will be your forever home and so, like, if financially everything else makes sense, we'll put the plan together and say is it today, Three months from now, six months, and so on? And that's just kind of how I look at it and I'm always open to like basically reviewing someone's credit, because I can do a soft credit pool and I can do a full review just by the soft pool, because I'll still see everything.
Speaker 2:So what I'm hearing you say is, no matter what part of their journey they're on, they should reach out to you and we should get them on a plan.
Speaker 1:Yes.
Speaker 2:Yeah, I agree.
Speaker 1:I like it. So, yeah, I mean that's what I would say. I just think that it makes the most sense, like, if you don't, no, pick up the phone and call someone and ask, or like Watch videos, read certain things online, and if you're not sure, like, what to look for, just like even if you googled, like Top 10, you know, like credit advice, you know tips or something like that, like start there, but like if you look at that and you're just like, this doesn't make any sense to me.
Speaker 2:Call me, email me and we can by calling they're gonna get a personalized plan for their their situation. Yes like what they have going on because like you said they could have this hidden Debt that is affecting them poorly and they don't even know about it. I mean, that happened to me actually when I switched from insurances my Geico, I switched from Geico to progressive.
Speaker 1:Just I hear name dropping people well it's, I didn't know.
Speaker 2:Oh, but I had like a hundred and eighty one dollar like transfer. I don't know what it was for, but it's probably your last bill and I didn't know about it. And I got a letter from a collection agency and I called it. I paid it immediately but, like you said, they're not, they weren't really hunting me down to get it paid. They sent me one letter and I caught it and got it done. I had no idea that it could affect my credit though. So well I know, once it goes to collections it can.
Speaker 1:But when you pay to do, they remove it.
Speaker 2:Yes, they did.
Speaker 1:I just want to make sure you remember.
Speaker 2:Yeah, I did, I checked.
Speaker 1:Yeah, and so if you just a little helpful you know, I don't know piece of advice if you pay a collection off and If, depending on the type of debt that it is, always ask for them to try to remove it, and if they will remove it, that is like golden for you because and then when they remove it, ask them for a letter of deletion, and and that is like Gold because if it kind of basically holds them to their word that they said that you know that they would remove it, and so if I went to go pull your credit six months after that happened, and if I say, hey, like you said, you took care of this and it's still on here, and you'd be like, oh, no wait, I they sent me a letter of deletion and I have it.
Speaker 2:And then you can override it.
Speaker 1:Yeah, I can send it in to basically have your credit score adjusted and have it actually removed at that time. Okay so yeah.
Speaker 2:This has been good. I like this one a lot this, and I think that this one especially is going to resonate with a lot of people, because Even I work in this world and there I still call you with questions about credit, my credit.
Speaker 1:I'll you were working on the moon. You work in this world like where else you the real estate world, oh, okay, this whole episode.
Speaker 2:But no, seriously, like Credit is such and it can't be such a touchy subject for people, you know. But we all have, we all go through this, you know we all have to.
Speaker 1:It's a requirement in order to really like function in society.
Speaker 1:Yes, so If which is crazy it is, but, like, in order to, if you don't come from a family who's gonna help you pay cash for school, pay cash for every car that you choose to buy, pay cash for a house that you choose to buy, like You're going to need to establish credit and then, in addition to establishing it, how do you keep a healthy relationship with it? And Then, from there, how do you let credit work for you? And that's when you take advantage of, like, like you know, cards that give you cash back and other perks and things like that because not just any credit card is a good credit card.
Speaker 2:Correct there you can just log Google credit cards and apply and you're gonna get a credit card in the mail, and that's just not how it works. This almost seems like this should be a class in high school, doesn't it? It should we didn't have it. I don't know. Do they have these? Do they have finance classes in high school now?
Speaker 1:Depends on the school district, but some school districts actually have a requirement to basically go through a financial literacy like year how lucky and Because we did not have that no. No, yeah no, and I should teach it. I Actually would love to teach it, you should. Yeah, I just start emailing schools. But now seriously this is really teacher, so I guess I could. But I also would have to like teacher. Yeah, that's a whole another conversation for a whole are you.
Speaker 2:I just learned new things.
Speaker 1:I talked to you every day and I'm learning well, I work here on earth, apparently you work here on the, you work on the moon, something like you work in this world and but yeah, no, I would like that.
Speaker 2:All right. Well, this was really informative to even me, so good job.
Speaker 1:Awesome.
Speaker 2:Well, thank you next time We'll talk a little more in depth about what happens next. So we talked about credit. Let's Get you to the next step. Yeah.
Speaker 1:All right, I like it.
Speaker 2:All right.
Speaker 1:Well, thank you guys. I hope that you enjoyed episode three with the reality of real estate podcast with Chris and Bree, and really just with Chris today. She was actually here, but if you recall, I was not on earth. Yeah, yeah, she doesn't work on earth. So thank you guys, and we will see you next time but in the meantime, if you want to reach us, Look at you. Is be layman realtor at gmailcom and mine is Christopher Lynch at CCM comm, and please make sure that you follow our new Instagram account new brand spanking we got one post.
Speaker 2:Do we have more calm yourself?
Speaker 1:reality of real estate podcast. But thank you guys.
Speaker 2:Chris is in charge of the podcast Instagram, so that's why we have one post, all right? Well, we will see you guys next time.
Speaker 1:Bye.
Speaker 2:Great day toodles.
Speaker 1:All right, friends. As we close things out today, remember home ownership is more than just a roof over your head. It's a symbol of your strength, resilience and determination.
Speaker 2:Take action, embrace growth and never be discouraged about where you are in your journey and remember to follow us on Instagram at Reality of real estate podcast our emails are linked in the description below.
Speaker 1:You can reach us at Christopher dot Lynch at CCM comm and my email is be layman realtor at gmailcom.
Speaker 2:All right, toodles.
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