What Matters Most – Home Buying & the Mortgage Process with Cody Sustakoski

Transcript

Eric: Welcome to the “What Matters Most” podcast presented by First United Bank & Trust. That’s my bank. Visit us today at mybank.com. Hello and welcome to “What Matters Most,” the podcast all about finances, community, savings, and security for you, your family, and your business. This podcast is brought to you by the helpful folks of my bank, First United Bank & Trust. I’m your host Eric Nutter. And in today’s episode what matters most is buying a home and the mortgage process. And for this helpful discussion, I am so happy today to be joined by Cody Sustakoski, mortgage loan originator at First United Bank & Trust in Morgantown. How’s it going, Cody?

Cody: It’s a little crazy around here. But it’s good.

Eric: So tell me a little bit about a day in the life of a mortgage originator.

Cody: So my job mainly consists of helping people figure out what makes the most sense as far as their financing options, gathering information, making sense of everything, telling their story, and being an advocate for them as far as getting their loan in the process, getting into underwriting, getting it through underwriting, and just kind of keeping them in the loop every step of the way, and helping them get to the closing table, where ultimately everything happens.

Eric: Right. Well, and getting a mortgage can be a scary process for people, especially if it’s their first mortgage. Can you talk us through a little bit about what are the goals that you typically work through with someone when you’re starting that process.

Cody: Yeah, I mean, one of the things we need to look at is short-term goals and long-term goals. Obviously, we can’t predict the future, but we can certainly try our best. It’s important to know whether somebody is buying their first home, their forever home. Whether they’re in a job that’s transient. And the different types of financing that go along with that sometimes using a shorter term adjustable rate mortgage might make sense to save them money. Oftentimes people that are more risk averse would go for the 30 year fixed mortgage, which would be the most popular option. But really showing them on paper, “Hey, here’s options A, B, and C. Pick the one that makes the most sense for you. And here are some pros and cons of each to think about.”

Eric: Right. Okay, during that process, what do you wish people understood better? Is there some tips or tricks, something that…thoughts that people should be thinking about when they’re considering buying a home or refinancing?

Cody: I mean, it mostly comes back to being prepared. Being aware of your credit situation and getting in early just in case there are any hiccups things that we can get out ahead of. And I always tell people, even if the answer is no, it’s not no forever. It’s how do we get there? But I’ll tell you staying organized as well. There’s a pretty defined checklist of information that pretty much any lender is going to need. And the faster you can gather that versus hodgepodging it together throughout the process, it makes the process a lot smoother, faster, and easier for everyone. And that’s where it’s my job to make sure I’m educating people on what they need to bring, and what they need to have to make this go smoothly.

Eric: Gotcha. So when they first start the process, it might be good for them to reach out in advance to their financial advisor, their mortgage lender in their area, or someone here at First United and ask, “What do I need to bring to the table?”

Cody: Yeah, I mean, it’s important especially if they’re buying to get in early and look through the pre-qualification or pre-approval process. And make sure that what they’re looking at is realistic. I always tell people, when we’re looking at numbers, you should walk away with three numbers. You’re gonna walk away with the banks number looking at what’s on paper, what the ratios say we should be at. You’re gonna walk away with Cody’s number where if maybe you don’t have a car payment, but if you’re driving the old jalopy in the parking lot, we need to throw a car payment into your debt scenario to make sure that when you do go buy that car, it’s not going to disrupt your financial peace. And then of course, there’s the borrowers number, and where they’re comfortable based on their budgeting. And as long as those three numbers align, then they’re typically good to go.

So it’s important to get in early and make sure we’re planning ahead. And then of course, when we’re pulling credit and looking at things again, if there’s any speed bumps that we need to try to get over, we figure out how to get over those.

Eric: Gotcha. Are there any tools or any thoughts that you can give to first-time homebuyers, something that can get them prepared for that process? Any apps or any calculator, something that can help them kind of prepare themselves what they’re about to see?

Cody: Yeah, I mean, a lot of times I like to just get them in and talk to me. Sometimes it’s a reality check. But I have a lot of tools that I can use. There is certainly loan calculators out there, there’s budgeting tools, there’s online credit apps, things like that. I would tell ’em, don’t pay for your credit report, you have to be careful. Watch out for those. There’s a lot of free ones. But also don’t put a lot of weight on the scores that those give you because they’re almost never accurate compared to what the lenders are going to pull. They’re a good toy or great tool to use to keep track of things, make sure that there’s no collections out there.

Eric: They’re more of a trend…

Cody: That’s exactly it. They’re a great tool to use to keep yourself in line, but they’re not foolproof. And then there’s always first-time homebuyer workshops. There’s nonprofits out there that work with people as far as looking at budgeting and looking at the different types of financing and grants and all the different things that are available for first-time homebuyers because there are a lot of advantages.

Eric: Yeah. Okay, what’s the best piece of financial advice you give to your clients when talking to them about financing their home?

Cody: As a naturally conservative person myself, I usually try to make sure that people stay somewhat conservative in their mortgage needs. People tend to want to overspend. We want those nice things, not everybody does. A lot of folks actually come in and are extremely conservative. And you always wanna make sure that you have enough for that rainy day fund. There’s the old rules of thumb of take your annual salary, multiply it by three and don’t buy a house more expensive than that. But that rule comes from the day when everybody was putting 20% down on a home because that was your only option. And nobody had student loan debt.

So taking some of those things into consideration now, those old rules of thumb don’t always apply. So we really need to dig in. But being conservative and making sure that you’re not gonna make yourself house poor is something I always try to preach, for lack of better words, to make sure we’re not putting somebody in a position where they’re miserable.

Eric: Right, of course. Now, those are good thoughts. Are there any other questions that you think we should be discussing, something that might be helpful for our listeners in regard to the mortgage process?

Cody: Just make sure, again, you’re prepared and you understand the expectations. Sometimes it can be timely. Sometimes it can be quick. But just making sure that you’re getting out ahead of it and asking questions.

Eric: Don’t wait till the last minute.

Cody: And not waiting till the last minute, exactly. But in regards to that, also, don’t be afraid to ask questions. A lot of people, and I hear it so many conversations, “Well, this is gonna sound like a stupid question.” And they need to realize I do this every day. So just because I hear that question multiple times, or it might seem like a stupid question to them. If I break my arm, I’m gonna ask a lot of stupid questions to a doctor because I know nothing about it, not that mortgage lending is as complicated as being a doctor, but the analogy.

Eric: Sure.

Cody: So people need to be comfortable asking questions, because that’s what we’re here for.

Eric: Absolutely. Let’s jump into some listener questions. And as a reminder, you can always submit your questions by visiting mybank.com/podcast or by emailing us at podcast@mybank.com. And our first question comes in today from Dan. He says he’s rate shopping, he’s rate shopping for a mortgage. And he’s getting a variety of different rates from all the different institutions that he’s talking to. And he’s wondering, shouldn’t he just go with the lowest rate.

Cody: That’s a very loaded question. And I can say, the rate is not always the only focus. So when you are shopping rates, obviously, every bank has different products, even different third party or secondary market products, as we would call them. Oftentimes banks will quote interest rates with points, which will drive the rate down.

Eric: Let’s stop there. And actually, what is a point?

Cody: So a point is translated to 1% of the loan amount. So if you’re borrowing $100,000, and they’re quoting your rate and saying that’s worth one point, then they’re saying there’s an additional $1,000 fee that you’re more or less buying your interest rate down. Which a lot of places do use as an option. I would just caution folks to make sure you’re asking that question, does this rate require any points to be paid?

Eric: Gotcha.

Cody: Because they’re oftentimes not disclosed in the first conversation. And it’s obviously very relevant, especially as you get in higher price mortgages and a short-term goal, paying a point makes no sense because you don’t recuperate the amount that you’ve paid up front in savings throughout the long-term interest. If you know you’re buying your 30-year home, it might make sense. But odds of someone keeping a 30-year mortgage, even if they stay in the home, are very slim. So I usually don’t advise buying points personally. But ultimately, it’s up to the borrowers.

Eric: So you gotta do the math. You gotta understand the situation.

Cody: You got to do the math. And I would also caution folks, if you call somewhere and you say what is your rate and they give you a rate without asking any questions, they’ve really done you a disservice. And it’s very important for us to know what type of home are you buying, what’s your estimated credit score, we don’t have to pull credit to give you an interest rate. Just know that the interest rate that I would quote is only as accurate as the information that you give me. But we really need to have a little bit more in-depth conversation and get a rate range because oftentimes they’re floating. I like to tell people, “Hey, if we were locking you in today, this would be your rate. But for your estimation purposes, I’m actually gonna bump you up in eight of a percent just to prepare you in case rates would go up. And then I don’t look bad if they come back and they’ve gone down.

But just again, that conservative comparison. So just be very cautious. And lenders can provide what’s called a fees worksheet or a loan estimate form is more traditional form once you started your application. But we can provide a pretty detailed breakdown to give somebody a good comparison if they’re truly rate shopping.

Eric: So they can compare apples to apples as opposed to apples to oranges.

Cody: Exactly, exactly. There’s too much detail to go into it to just be strictly focused on the rate.

Eric: Excellent. That’s great point. All right, actually, that is our only question. So, Cody, I wanna sincerely thank you for joining me today and providing such helpful insights. If any of our listeners have any questions, maybe they wanna learn more, maybe they’re in the market for a mortgage, how can they reach out to you or what should they do if they’re in that mindset right now?

Cody: So certainly, they can go to our website at www.mybank.com. And they’ll actually be able to find me by going through the links and it’ll have my direct phone number, which is 304-291-9511 if anyone cares, and be happy to help them.

Eric: Great, that does it. That brings us to the end of our show. You can always find more episodes by visiting mybank.com/podcast or you can find us on your favorite podcast app. You can also always leave feedback, ask questions, or requests to topic for us to discuss by sending us an email to podcast@mybank.com. We’re thankful for you to be listening. We will be back next week with more helpful content. But until then, we wish you the best and focusing on what matters most to you.

Song: First United, my bank for life.

Eric: Remember FDIC Equal Housing lender. This recording is for informational purposes only. Any references in this recording to any person, organization, product, or service does not constitute or imply the endorsement, recommendation or affiliation with First United Bank & Trust. First United is not responsive for your use of the information mentioned within this podcast. Please consult legal or tax professionals for counsel as needed.