Debbie has nearly 20 years of investigative experience and journalism on topics of insurance, mortgage, and financial advice.

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Money Strategies with Debbie

TDD 122 | Mortgage Issues

Pool Loans Go Into Mortgages?

TDD 122 | Mortgage Issues

 

The loan process can get tricky at times, and it helps to have a professional by your side to help you deal with mortgage issues. In this episode, Debbie Bloyd answers some more interesting mortgage FAQs: Do pool loans go into mortgages? When do you lock your loan? How do you keep your credit scores from going further down? Where can you get money for down payments? Listen in as she discusses each one of these issues at length.

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Pool Loans Go Into Mortgages?

We talk about money, finances and real estate here, and we are going to do something different. I’m going to talk to you about what’s happened in my daily life, at the office and what questions I get and why am I getting these questions? Maybe that can help you as well. I got a great call. I’m in the State of Texas. Our laws are a little bit different, maybe then the state that you’re reading from is. Keep that in mind. Here in Texas, we’ve got some interesting rules when it comes to getting cash out on properties that you own. You can do a cash-out refinance on your primary home. You can do it on a second home and you can also do it on investment property, but the amount of money that you’re able to get out on all those are different. For a primary or secondary home, you have to keep 20% equity in the deal based off of the appraised value. If your house appraises for $500,000, you can take 80% of that value out. That can be in the loan and paying off bills, but can’t go over that 20% equity. On investment properties, you can only go to 70% with some lenders, 75% for other lenders. It all depends, is it one unit? Is it a fourplex? Everything has different rules. Let me say before I get nasty emails or text messages, everybody’s got a different set of overlays on top of what is already there.

It’s important to remember that these are the guidelines, but extenuating circumstances have changed things a little bit. We want to make sure you understand the premise of how it works, not the exact formula for the numbers because that changes with every lender. I had two clients called me, both inquiring about pool loans. One wanted to get a pool loan. The other already had a pool loan and wanted to somehow get it into the mortgage. Let’s take the buying of the pool loan first. When you get a pool loan that is another line of credit that goes underneath your house on the credit report, it’s not in the same line. Your mortgage is your mortgage and you probably have a nice low-interest rate of that of 3.5%, 4%, not call me and we should refinance you because rates are low. You have a mortgage payment. To buy a pool you can go to a community national little bank in your area. They have considered what they call pool loans or lines of equity loans. That’s a line of equity that doesn’t mess with your current loan on your house. It rides alongside right underneath it like a home equity line of credit or a lien. Those are expensive. If you can find them, they could be upwards of 8%, 9%. That used to be the price of a second lien on your house if you ever did that back in the early 2000s, 1990s.

Pools are depreciating assets. You will never get its full dollar amount when you’re done using it. Click To Tweet

You’re going to have a mortgage and to get a pool, you either need a personal loan, a little home equity line of credit, but that’s nothing that I do as a mortgage lender. I’ve had to have a house tied to it. A lot of pool companies also allow you to get out a pool loan through their resources. Their credit is more like credit cards and those interest rates can go from 14% to 18%. It’s like a credit card, but pools are what they are. They’re $50,000 or $90,000 a depreciating asset. You’re never going to get the full dollar amount of your pool out when you’re done using it and you sell your house. If you put an $80,000 pool in, you better enjoy that pool because it’s only going to be worth about $40,000 of that when you go to resell your house. If this is your forever home it doesn’t matter. You’re going to have years and years of enjoyment with it. Don’t worry about it. That’s how you buy a pool. The other call I got was, “I already bought the pool. I’ve got a separate line of credit at 18% for my pool and now I want to roll that into my mortgage note. How can I do it?” “You need to do a cash-out refinance.” He goes, “No, I don’t want to take cash out. I want to refinance those two together.”

Anything that’s not your mortgage is considered a cash-out here in Texas. What we would do is pay off your mortgage and we would add in your pool loan and we combine those two together and that is a Texas cash-out. Your rate is about a half a point higher than it would be if you’re refinancing. If you can get a cash-out refinance in the State of Texas at 3.5% to 4%, and you’re paying 18% on your pool note, you better do a cash-out refinance and get a home equity line on your home. Once a cash-out, always a cash-out. What that means is once you do a transaction where you take cash out of your house or you consolidate another loan with your house, pay off credit cards, that’s considered a cash-out. You can never go back to not being a cash-out in the next transaction. I don’t think interest rates are going to drop any more than they have, but let’s say you want to refinance your home and not take cash out the next time. You’re still going to be penalized half a point like if you were taking cash out, even though you’re not because you did previously. That’s a funky little state law we have here in Texas. Once you change over to Texas cash out, you were always a Texas cash-out no matter what you do.

The next topic we need to take a look at is locking your loan. You got a lot of misconceptions and a lot of different people getting a lot of different information off the internet about when is the best time to lock a loan and what can we do to lock a loan? What are the benefits of locking loans? If you’re working with lenders and you’ve called and they say they want to lock your rate, or they will lock your rate, let me explain a lock. Once you lock a rate with different lenders, they all have different rules. Some have float downs, which means that you can lock a rate and for a fee, you can float down if, during the process, your rate goes lower. The thing is you would have to know when to do that. You have to trust your loan officer that they’re going to shoot you straight. This is a slimy business that I’m in.

TDD 122 | Mortgage Issues

Mortgage Issues: Your credit scores will continue to go down if you let several lenders pull your credit.

 

A lot of people do the bait-and-switch where “We tell you one thing and we do something else.” I hate that. That’s why I don’t have anyone else working for me and I work by myself because I know what people are saying, I know what I’m promising and I want to make sure that I can promise that. What I promise when I lock a rate, is that you’re on the phone with me and we usually FaceTime or do a Zoom call so you can see my screen and watch me lock. It is a much more complicated process than you think. Locking a loan, you can lock it 15, 22, 30, 45, 60 days. I can lock you a rate in 60 days, but that’s not going to be near a good rate as if you raped to the middle of the transaction when you’re 30, 20 or 15 days out.

You have to trust the lender that you’re working with that they’re going to keep an eye on the rates and lock your loan as soon as the time comes. There’s no way for you to know what the rates are doing every day. They go up and down. Some lenders change midday, some lenders wait and only change them once a day. You have to know what you’re working with. As a broker, I work with companies that do it in all kinds of ways. As soon as I get an email from a company saying, “Great news, our rates are dropping.” I started scouring that internet for all the lenders that I work with and loans that I have set up because my people usually float until we give within those 30 days when rates are good. If you’re purchasing a home, it’s a little bit different than when you’re refinancing a home. When you refinance a home, there’s not an exact deadline. We can shop harder for a better rate. When you purchase a home, you have to go ahead, lock your rate. Picked them with a lender so you can get through underwriting so you can close on time. It does matter. You can’t shop at rates forever. You do have to lock loans within 30 days.

You have to make sure that you trust your lender before you lock your loan. Click To Tweet

Processing and underwriting take about 30 days to do. There’s a lot of information you have to know to lock the rate and just because you get a quote and then three days later, you’d call me and say, “I want to lock that rate you had from Tuesday.” “That rate expired Tuesday night, I don’t have it anymore. We’ve got to start over. I have all your information I have to reprice the loan.” Sometimes the price is higher and sometimes it’s lower. They don’t all move in unison. One lender can be a little higher. One lender can be a little lower. That’s why I say a broker is so that I can shop all those interest rates and I just don’t have one. If I was a banker of Bank of America, I have Bank of America rates and that’s it. I want more choices for my clients. The next topic we need to talk about is credit scores. That’s a real problem for a lot of people. During the whole COVID-19 thing, a lot of people took forbearance on their house. Before you refinance, you’ve got to bring that up to speed.

You can’t refinance your home when you’re not paying any mortgage. You have to bring those payments up before I start the refinance and that’s something they didn’t tell you guys about. I have a lot of people that said, “Yes, I want to do forbearance.” The problem arose, “I can’t refinance my house.” You can after you bring it up to speed with your interest rates being what they are and then how they change every day. People are wanting to buy houses all the time and you have to be pre-approved before that. Pulling your credit is another iffy thing to do. If you give every lender your Social Security number and allow them to pull your credit, your score will continue to go down. I don’t care if they call it a soft hit, a hard hit, whatever hit they call it. We, as a lender have to do what they call a tri-merge file. That means I have to have all three bureaus and it’s going to be a hard pool. You’re going to lose a couple of points when I pull your credit. If you let everyone do that, you’re going to have a problem because we’re all going to be doing that and your score is going to go down. I have to use the score that I pulled. I can’t use a score that anyone else pulls. When you are shopping between lenders, brokers, and banks, you have to be confident in the person that you’re working with. You have to be able to get a hold and trust them.

I always think it’s better to be recommended to a lender by your agent. Someone that the agent knows that you can put your finger on because if not, you’re getting that big bank system you’re just a number. There are no ramifications for my realtor friends. If they send a client to Bank of America, it doesn’t close on time. Do you think Bank of America cares? No, but I care as a broker because I get business from that agent. I don’t want to let that agent down. It can do a lot of damage my reputation. When you’re figuring out who to choose, make sure you pick some reliable, dependable people that you can trust when it comes to rates and pulling your credit. We need to talk about the sources of money. Sources of money are important like credit scores. Your credit scores have special overlays during COVID-19 on them. What that means is where FHA may be started at $620, now they raised it to $640. However, that does not mean that you cannot get a loan if you’re at $600 right now. As a broker, I’m signed up with lots of lenders and do go down that far in credit. I’ve got some that go down to $550. If you’re in the State of Texas with bad credit and you hear this, give me a call. I can help. I work with banks that do that. I will be happy to help. Let’s talk about down payment options. Sources of money for a down payment are a little tricky.

TDD 122 | Mortgage Issues

Mortgage Issues: You have to prove that your money has been in your account for more than the last two months before you can use it to buy real estate.

 

If you come from another country, you don’t understand our standards, but there are laws that I have to adhere to. It’s called money laundering if I don’t do it the right way. I’ve taken plenty of courses. We’ve got to take courses every year in money laundering. As far as I know with my lenders, you have a Bitcoin collection or account, it does not count for anything. You need to have your money in stocks, bonds, mutual funds banks that I can prove. To use the money for a down payment, we are looking at the last two months of bank statements or investment statements, or the last quarter of a 401(k) or an IRA statement. What we’re trying to do is prove that that money has been in your account for more than the last two months. You didn’t get a lot of cash put it in there and then you’re going to buy a house with it. That would be money laundering. If you’re using money from other sources and I talked to you, this all happened because I got a call from a client agent. They said, “My client is from out of the country and we’d like to transfer money from China here to the United States to buy real estate.” I’m like, “That can’t work right now. We’re not accepting funds from anywhere.” That means that we’re going to have to use the money he has in the States. That’s the only question of what is money is. I said, “You can transfer it over, but then you can’t buy until that set in your account the appropriate amount of time.” Bitcoin doesn’t work either. He had some of that. We can’t use it.

If you’re getting a gift or a down payment, the gift for the down payment, if for an FHA loan or a conventional loan, you’re getting part of the gift from mother, father, sister, or brother. Those are the only people we can get payments from the current time. You have to fill out a gift letter and then you also have to have two months’ worth of their bank statements showing where that money came from. You’ve got to tell me everything so I know where your money’s at and you can’t say, “Don’t worry. I’ll get it.” That always worries me because I want to know where you’re getting it from. I have to prove. It can’t be cash. It can’t be from I trust if you don’t operate it and it can’t be from IRAs, you take out more unless you have a record of doing that. Down payment money is precise. We need to talk about these things. If you’re going to buy a house and you have questions months before you do it so that we get all your money lined up in the right place. I talked to a client, he says, “I’m going to move everything around on Monday so that we can use it for our down payment.” I’m like, “Don’t move anything, that messes us all up. Leave it where it’s at until the very end of the transaction when we get ready to go to closing, and then I’ll give you a heads up when you can move the money. That money has to be verified and vetted first before anything else.”

Another thing that’s going to make everybody mad during this time is vetting your job. We have to verify your job. When we start the loan, they verify your job the day that you close and fund the loan. They want to make sure you haven’t lost your job somewhere in between. With a lot of HR departments being not in the office all working from home, it’s harder than ever to verify job employment. We have to do that the day it funds or the day before it funds all the lender’s call. It’s not I can even get a number for them. They have to call. Sometimes I’ve had people start providing me numbers of their cell phones of their bosses and other HR employees so that we can verify their funds and their jobs the day before they close. This is hard because there used to be a work number that we can get everything verified through. It doesn’t always work in times like these where we’re in lockdown and when a lot of the offices aren’t up to speed. The loan process can be simple, but the more complicated you are as a person, the more complicated my job gets. Believe me, there’s always something to upset the process. We’re going to go through it as smoothly as we can, but there’s always going to be a bump. I never know where it’s at. Thanks so much for being with me in this edition. We’ll be back with more.

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