It Starts with a Dollar | Ep.01 | Home Buying w/Rick

It Starts with a Dollar episode 1 is a practical, no-nonsense conversation with Rick Bromley, AVP of Mortgage Lending at Dover Federal, designed to offer financial freedom. Listeners will walk through every step of the home-buying journey, from dreaming about a first home to making it a reality.
 
 🎙️ What It’s About
 The home-buying process is broken down into clear, easy-to-understand steps that are even easier to follow. The friendly, educational discussion offers expert advice on real-life scenarios.
 
 🏘️ What You’ll Learn
 How to determine your true budget (beyond just mortgage pre-approval)
 Understanding mortgage options and interest rates
 Understanding the value of equity in your home
 
 👥 Who It’s For
 First-time homebuyers
 Renters preparing to buy
 Homebuyers tapping into the equity in their home.

Transcript

SPEAKER_01 0:00

Welcome to It Starts with a Dollar, real talk about financial freedom. I'm Krista Cooper, and this is a series with our friends at Dover Federal Credit Union, where we talk about the money stuff that actually affects your everyday life. So today we're talking all things home financing with Rick Bromley, AVP of mortgage lending at Dover Federal Credit Union. So welcome.

SPEAKER_00 0:22

Hey Krista, thanks for having me.

SPEAKER_01 0:24

Of course. So we're going to dive into a lot here when it comes to buying a home.

SPEAKER_00 0:28

Oh, yeah.

SPEAKER_01 0:28

I can't wait. All right. I feel like I'm going to learn a lot of information here, which is good. It's really good to get this information out. Whether someone's thinking about buying their first home, maybe they're thinking of refinancing, maybe they're thinking of building a new home, right? Or tapping into their home's equity, you're here to break it all down in a way that actually makes sense. Which we appreciate. Um, so let's jump right into preparing to buy a home. So we're going to start at the beginning for someone that's listening, that's thinking about buying a home. Maybe it's this year, maybe it's in the near future. What should they be doing now to prepare for that process?

SPEAKER_00 1:00

Well, thanks for asking that question, Krista. And I'm sure all your listeners, they're very well informed and all they hear about is affordability. That's the main topic now with home buying. And it's a good topic because we got really spoiled with low rates for a long time and rates went up a little bit. So affordability becomes much more important. And I would say to prepare to buy a home, you want to think about well, what's my average mortgage payment going to look like? And that's anywhere from $2,000 to $2,500 a month. So a lot of times we'll talk to folks that are renting and say, what's an affordable mortgage payment for you? And they'll say, $1,200, $1,500. And that's like, that's like a five to 10-year-old number. So, you know, when you own a home, you're looking at a higher payment potentially. Um, but you own the home, which is great. And I remember when I bought my home, I thought to myself, boy, I'm gonna kick a lot more people out of my house than I ever have. So um, but it's a beautiful thing. You start to build equity, you can do whatever you would like with the home, um, and it's wonderful. So, so to prepare for that, I I always say build a budget. You need to start looking at what you can afford and what you can cut from your budget by reducing debt, slashing payments, maybe you can refinance your car to get a little lower payment, maybe you have some credit card debt, maybe you could do some kind of consolidation that'll help free up money in your budget, and uh and and that'll just get you into the house sooner. Um, another big thing you need to do is start thinking about your down payment, because that actually the more money you can put down, the lower your payment can be.

SPEAKER_01 2:31

That's one way to look at it.

SPEAKER_00 2:32

So you can afford more house.

SPEAKER_01 2:33

Right.

SPEAKER_00 2:34

Or the house you like can become more affordable.

SPEAKER_01 2:37

Yes, exactly. Um, talk about credit too a little bit, like building your credit in this process. Like if somebody's thinking, I want to do this, but my credit's terrible.

SPEAKER_00 2:45

Yeah, well, well, if your credit's terrible, good news, we have access in all of our branches of to a credit score analysis where we'll do a soft pull of your credit, we'll see where you're at, see what we can do to help boost your credit to get you mortgage ready, which is important. Um, we can go down as low as a 580 credit score to do a mortgage for you, but you're gonna have to put more money down, the rate's gonna be higher. That goes right back to the affordability conversation because higher rate means higher payment. So that's why you want to have the best financial picture you can put forward when you go to buy your house because it's a long-term commitment, and the better prepared you are financially, the better you'll be from a payment standpoint, long-term, and uh it just becomes a much better situation for you.

SPEAKER_01 3:30

Yeah, absolutely. So I know you mentioned on down payments and closing costs, because a lot of buyers they worry about how are they gonna come up with this, you know, big chunk of money. So, what options are available if someone needs help in that area?

SPEAKER_00 3:41

Yeah, well, I I I would always say the best thing is put down as much money as you can. And you got to think too, uh move putting the money down, you also have to have closing costs. So to answer your question, um typically you want to put at least 20% down, but we have programs where we can offer down payment assistance uh for uh to help you get into the home if you don't have a lot of money saved. You'll still need some money out of pocket, uh, but let us uh talk with us, talk to a professional at Dover Federal. One of our mortgage lenders will be glad to see what you need to do to get into a home.

SPEAKER_01 4:12

All right, so can you explain the down payment assistance loan and then also go into the first front door grant and talk about who may qualify?

SPEAKER_00 4:19

So the two programs can be used together, but I'll talk about them separately, Krista. And it's a great question. So the down payment assistance loan, we do it as a conventional loan. So minimum credit score is $660. Uh, you have to have some money out of pocket because you have to pay for your appraisal. Well, before that, you actually have to pay for the deposit to secure the home to put a contract on it. So those funds you'll need out of pocket up front. But typically we can cover the rest with a second loan on the home that can go up to 105% of the home's value.

SPEAKER_01 4:46

Oh, that's the down payment assistance. That's our down payment assistance, correct. That's good to know.

SPEAKER_00 4:52

Yep.

SPEAKER_01 4:52

And then the first front door grant is something different.

SPEAKER_00 4:55

Yeah, the first front door grant is different. That's an actual grant. It's it's forgivable after a certain period, but but essentially you can get a grant. Um, we have two grants that are coming up. One is coming up in the month of April, and it is the Keys grant, and it's up to your income can be a little higher. It's up to 120% area median income, at or below the area median income. And um, that's for all persons that live in the home. You have to put fifteen hundred dollars out of pocket, and then the grant would cover a lot of your closing cost and down payment.

SPEAKER_01 5:28

Oh, yeah. Okay, and then how can somebody get some more information on that?

SPEAKER_00 5:31

You go to our website, Doverfcu.com.

SPEAKER_01 5:34

And that's starting in early April.

SPEAKER_00 5:35

That's starting in early April. But you should get pre-approved ahead of time, so you want to start getting ready for it now and start talking with us now about it, so we'll be prepared because funds are limited and they can go fast. Uh sometimes they even go in the same day. So we want to get you all set and ready to go. Um, that way when the window opens up, we can put your info in, you can get your reservation, and then you have some time to shop for your home. And we have those grant funds reserved for you while while you're house hunting.

SPEAKER_01 6:02

Oh, okay. That's good to know. So if you want some more information on that, it's the first front door grant, and you mentioned something with keys.

SPEAKER_00 6:08

Yep, that well, that's the keys grant. Keys grant. Yep, that's the keys grant. And and that one's in April. In May, there's the first front door grant. Oh, okay. And that is if your income is at or below eighty percent area median income. And and the big difference is the the first front door grant that's in May, you you have to be a first-time home buyer. Oh, okay. But for the keys grant that's in April, you have to be a first generation first-time home buyer. So that means your parents or the folks that raised you can't have owned a home before either. And then you can qualify for this grant, both up to $15,000, which is exciting.

SPEAKER_01 6:40

Yeah, that's good. All right, we touched a little bit on refinancing too, and just the importance of here and just maybe understanding really like when that actually makes sense for somebody.

SPEAKER_00 6:49

Well, refinance, it's always about return on investment because there's a cost to do it, and you're gonna have to go through another settlement. Uh, we make it easy. Uh, we give you all the information up front, how much it's gonna cost, send you a nice loan estimate so you can see people usually roll the closing cost into their loan, and you do that to get a lower payment or lower interest rate. Right. So, why I say it's about return on investment, you're gonna pay money up front and get a lower payment. Uh, so you usually want to recoup those closing costs within a two to three year period, and then you're really saving money. Despite your payment going down right away, you're you're you know, you had to pay to do that. So that's why I say it's all about return on investment.

SPEAKER_01 7:31

Oh, I'm learning something.

SPEAKER_00 7:33

Yeah, so you want to this is good. Yeah, right. This is good. Yeah, it's it's exciting because you wanna you wanna see when a good time is. So, so a lot of folks out there, you're in great shape. You got the golden handcuffs, you're in the house, you got this low interest rate, your home payments are affordable. But if you haven't bought as of 2023 when the interest rates went up pretty quickly, your payment's probably a lot higher. There's a lot of people sitting out there at six and a half to all the way up to eight percent mortgages, and now that rates are starting to dip down below six percent, it's starting to make a lot of sense to refi. So, again, it's it everybody has their own unique situation, and we want to make sure it makes sense for the refi. Talk to us, let us see what we can do to help.

SPEAKER_01 8:12

Yeah, that's definitely the first step in that process is to see where they stand and um what you guys can do to help them out. Let's uh jump a little bit more into fixed and adjustable rate mortgages then. So, are fixed rate mortgages the only option for buyers, or are there situations where maybe something else makes sense?

SPEAKER_00 8:26

A 30-year fixed rate loan, Krista, is very popular. Folks love it. Uh believe it or not, it's sort of unique to America. A lot of countries, I have some friends from other countries, they're like, wow, you can lock in a rate for 30 years. We have great rates for our 30-year fixed rate. We can save you a lot of money compared to some lenders out there. Other folks like to take advantage of an adjustable rate mortgage, which is an arm. And a lot of times we think back to the arms of the past and and how they can jump up really high and they're not controlled. Our arms have caps set to them. Um, our I like to say our arms have legs, you know, they can really help you get into the house because we offer them at a lower rate because it's only fixed for either five or ten years. And then in either the fifth year or the sixth year, the rates can adjust based off whatever the current market is at that time. Yeah. There's a cap though for the five year, it can't go up or down, because the rate could go down too. It can't go up or down more than two percent on our five-year arm and on our 10-year arm, which is a nice long term. Um, it the max for that to adjust is 3% up or down. And there's a lifetime cap on both of 5%. And there's no prepayment penalty, so you can refinance, you can sell the house. See, a lot of folks they think, well, I'm only gonna live in this house for a few years. Adjustable rate mortgage is a good option for them. If if I'm gonna live in a house for five years, a five-year arm or a 10-year arm is gonna save me money. Because what do I care if it adjusts in year numbers 10 or 5? I'm gonna be out of there. I've sold the house. Right. There's no prepayment penalty.

SPEAKER_01 9:55

Okay, now that's all really good to know. So you're saying it won't, because I think people think, oh gosh, like it's not controlled, right? It could just go up 50% and you know, but it doesn't. You're saying there's a cap.

SPEAKER_00 10:05

Yeah, there are caps in place. And and and what we like to do is take a consultative approach and talk with our applicants and our members to to see what their plans are and match them up to a product that fits their needs.

SPEAKER_01 10:17

Right. I mean, that's the most important. I am I'm learning a lot. This is really good information to get out there for those, um, you know, whether they're in their home looking to refinance or or looking to uh to buy a home, but let's also talk about the big dream of somebody wanting to build a custom home.

SPEAKER_00 10:31

Oh, custom home.

SPEAKER_01 10:32

Let's make that a dream for somebody listening right now. But what should they know before they start that process?

SPEAKER_00 10:37

You should you should start thinking now about what color drapes you want, what color paint, all the details, all that stuff, because that is a I'll I'll talk to folks that want to build a custom home, and then we won't actually close their loan for a year. It's a long sales cycle, but it's an important sales cycle because just imagine uh you're if anybody's done any kind of home improvement or any big repairs, think about to yourself, ooh, my wife and I, we could get uh going back and forth uh what color uh cabinets we want or countertops. So these are all things you got to pick out when you do a custom home. But we have actually one of the best construction programs. We offer a one-time close, and uh our our rates are really great. Uh, we offer a one-time close. We have a lot of experience in it, and um we uh the way it works, it's uh interest-only uh payments that are due during construction. Uh, and a lot of folks are already in a home, so they have their old mortgage that uh I say old, but their current mortgage for their house that they're in now, and you'll have to carry the construction loan at the same time. Some folks sell ahead of time, some folks wait until they're done and sell once the new house is done so they can move right from the other, and then some folks live uh with family or relatives right during the process while the home's being built.

SPEAKER_01 11:48

Yeah. Does Dover Federal Credit Union's local experience and competitive programs help make this process a little smoother for folks?

SPEAKER_00 11:55

Oh, sure. Yeah, we have uh so so again, we we know the area. Um in Delaware, uh people always say real estate's hyper local. And and I think real estate's always local all over, but Delaware especially. So we're you know, we're all uh local. Uh we're here uh for you when you have questions. We have the experience and knowledge and and connections with builders and and the process, and we'll and we'll walk you through it.

SPEAKER_01 12:18

Yeah, that's awesome. All right, let's shift to home equity for home uh homeowners who've built equity over time. How can they tap into that?

SPEAKER_00 12:26

Well, we offer we offer actually a couple different types of home equity loans, and and we really start with what are you trying to do with this home equity loan? What is your goal? And and we talked about kitchens for a custom home, but some folks have a kitchen like me that needs to be remodeled. And I would say, well, I'm just gonna get a home equity line of credit, and you can go up to 100% of your home's value. Uh that's a nice feature that Dover Federal Credit Union offers going up to 100% loan to value of your home. And do you know what loan to value of a home means, Krista?

SPEAKER_01 12:59

No, loan to value.

SPEAKER_00 13:02

So so if your home has a certain value, okay, uh, let's say it's $500,000 and on your pri on your mortgage you owe $300,000. Well, you have $200,000 in equity right there that you can borrow against. And um, some folks would want to be more conservative doing that because if you sell the house and you've already borrowed that money, well, you don't have any equity now. Right. Um, so but maybe you're not gonna sell, or maybe the improvements you're gonna do is gonna improve your living situation, or it's gonna improve your equity position too for that eventual time when you do sell.

SPEAKER_01 13:32

Yeah, so it can improve the value of your home. Yes. And then you need the money now. Yes. And as long as you can get accepted for it, and that's the process, I suppose they come in and apply.

SPEAKER_00 13:40

Yeah, and you know, it's the same thing. You never know for sure that it's gonna increase your value, but they generally when you improve your home, it it's gonna uh increase in value somewhat. So Yeah.

SPEAKER_01 13:49

Uh what are there different types of home equity loans?

SPEAKER_00 13:52

Yeah, we offer two types. And going back to asking what the goal is with the loan, some folks say, I'm just gonna do my kitchen. I need $50,000 to do it. I want to have a one-shot deal, I'll borrow the money, fix payment, boom, it's done. That's a closed-end home equity loan for us, and uh that's you know, that's fits a lot of people's need. Some folks might say, Well, I'm gonna do a kitchen now, and then a few years later it looks like I'm gonna need a new roof. So the you know, we would say, Well, let's see if we can do a home equity line of credit that would cover both those amounts, and you only use $50,000 now, and that's the only amount you pay back on. That's what the beauty is of a home equity line of credit.

SPEAKER_01 14:26

Oh, so you're only gonna pay back on what you use, the rest of the money is available, correct. Yes, it's not paying off on it immediately, and it just sits there until you use it.

SPEAKER_00 14:34

Okay. So you only pay on the you only pay interest only payments on the amount that you've used. Yeah. And we our home equity loan is unique somewhat in that you can lock in fixed rate segments of the home equity line of credit. So say you do that $50,000 kitchen, you can lock in a rate because a home equity line of credit is a variable rate mortgage, so it moves when the prime rate moves. Um, but we offer when you advance money, you can lock it in and have a fixed payment. So we go up to 20 years. The beauty of it is if rates go down, you can unlock that segment, redo your payment, and then lock it in again at a lower rate. So that's a really nice feature that our home equity line of credit offers.

SPEAKER_01 15:14

That's awesome.

SPEAKER_00 15:15

That's called the your choice home equity line of credit.

SPEAKER_01 15:17

Your choice home equity line of credit. I like it. Is it work kind of like like a line of credit would?

SPEAKER_00 15:23

Yeah, it's kind of yeah, you so that's the beauty of it. So going back to the other closed end, you borrow, it's done once you pay it off. What a line of credit is you can borrow, pay it back, borrow, pay it back. It's kind of like a credit card, but it's at a much lower rate typically. Right. And uh your house is the collateral.

SPEAKER_01 15:39

Yeah. So one of the biggest questions that people ask is what can I use that money for?

SPEAKER_00 15:45

Anything legal. You can use it for illegal purposes.

SPEAKER_01 15:48

Yeah, well, that's a really good start.

SPEAKER_00 15:50

Um well, so that's a great question. You can use it to pay for uh your your children's wedding. You can use it to pay for your own wedding.

SPEAKER_01 15:57

It doesn't have to be on your home.

SPEAKER_00 15:59

No, it doesn't have to be on your home. Yeah, no. No, yeah. I mean, you could you maybe you're helping a relative. Maybe your son or daughter wants to buy a home and you think, well, I'm gonna tap into my equity and help them with their down payment and closing costs. So that's that's an option. Oh, and uh, Krista, you know what a lot of people use home equity line of credits for? They're looking at their monthly credit card bills and they're like, oh my goodness, I'm paying 29.9% on this credit card. How am I ever gonna get out of debt? And a lot of people just make minimum payments on them. So in the case, it might take 50 years to get out of debt. So what people would do is they'll sometimes use the equity in their home to lock in a low rate, slash their credit card debt down, secure it on their with their line of credit, and uh then much lower rate, and they can actually get out of debt.

SPEAKER_01 16:43

Well, yeah, because in that case it's at the much lower interest rate.

SPEAKER_00 16:45

Oh, by far, yeah. So yeah, by far. So you're you're like I said, you know, a lot of credit cards are 10 to 20 some percent, 20 plus percent. Yeah. And uh and there's a lot of talk about that in the news media these days too, with with credit card interest rates, where the home equity uh loan it's it's gonna be well under that, probably well less under 10 percent.

SPEAKER_01 17:05

So all right, this is good stuff. I think people think home equity line of credits or loan that you you have to use it on your home. Yeah, no, this is good this is good information.

SPEAKER_00 17:14

Common misconception, Krista. It's very flexible. That's that's the beauty of it.

SPEAKER_01 17:19

That's good to know. That is really good to know. All right, so before we wrap it up today, what's one piece of advice that you would give anyone thinking about buying, refinancing, or using their home equity?

SPEAKER_00 17:27

Think about your budget. If you're gonna buy a house, you need to think about your budget because your mortgage payment, you got to pay it first every month, and it it's a big part of your budget. Yeah, and you want to have flexibility, but you also have to be realistic. Uh like we were saying earlier, if your payments $2,000 to $2,500, okay, that sounds like a lot. So you might need to start making some other sacrifices in your budget because homeownership is wonderful.

SPEAKER_01 17:50

Yeah, it really is. And Dover Federal Credit Union can help.

SPEAKER_00 17:53

And we can help.

SPEAKER_01 17:54

Yes. All right. So I'm sure if they would like some more information, information on the website.

SPEAKER_00 17:59

Yep. So we can be reached uh via email at mortgages at DoverfCU.com or at our website, www.doverfcu.com slash mortgages.

SPEAKER_01 18:09

Awesome. Good stuff here for anybody looking to buy a home, refinance, build their custom dream home, or even take out that home uh home equity line of credit. This is all great information. So Rick Bromley, AVP of mortgage lending at Dover Federal Credit Union. Thanks for breaking this down to where we all kind of understand it a little bit more. You simplified it for us.

SPEAKER_00 18:26

That's great to hear. Thank you for having me, Krista. I appreciate it.