Dillon: Hey everybody. This is Dillon Robinson with Pam Robinson Real Estate. Back with another episode of the Pam Robinson Real Estate Variety Show. Today, we are here with Dan Perreira from Union Home Mortgage. He’s going to give us a little bit of the insight that we need as realtors, as well as buyers for what rates are looking like, some of his loan programs and really what the state lending situation is looking like. So, stay tuned. We’re going to give you some great information. We look forward to hearing what Dan has to say. All right, everybody, we’re back. And again, we are here with Dan Perreira. Dan. I appreciate you being here. My man.
Dan: Thank you.
Dillon: Looking forward to some good information that we’re going to be able to hand out to our buyers and sellers here. Now, Dan, I’m sure you get the same call just as much as I do, but everybody’s wondering right now, how are interest rates?
Dan: Tell you right now, Dillon rates are great for good customers. They’re actually at some of the all-time lows. There’s a bigger differential in rates due to liquidity and liquidity is cash in, cash out. So basically, in our industry, you get payments, payments come in, money’s split up-principal interest, taxes, insurance, and then it’s put together in securities and then it’s lent out. And because of the lack of liquidity, the people with lower end credit scores are having a hard to getting a loan, but the excellent customers are getting incredible deals. This is a great time to buy a house right now.
Dillon: Absolutely. So, in saying that, we can Segway into our next question here. Let’s have a little bit of a discussion about what a credit score is. I know a lot of people; you hear about it, “You can get your free checks online or whatever it may be. Let’s help people understand a little bit more, what a credit score actually means to them?
Dan: The credit score opens the doors, whether you can get qualified or not, but I tell people a couple of things on credit, first and foremost, online credit bureaus are like a Kia, a Mortgage Credit Bureau is like a 7 series BMW. There is no comparison. And I get that. You laugh, but I get that all the time.
Dillon: I get it.
Dan: People are like, well, my online credit score is 780 and my mortgage is 500. Why is that? Well, we’re comparing a Kia to a 7 series BMW. Prior to this COVID-19, we actually did not have credit scores i. e minimum credit scores. We do now, we had 640. We dropped them to 620 and then once again, it all goes back to the liquidity issue. All the major lenders, bank, all the major banks are at 700. So you know, credit score gets you into the market. It opens the doors. So you got to have that score.
Dillon: Okay. And we were talking there, I know there’s different types of loan programs and obviously the higher your credit score, the better your rate, the better opportunity and the better package you’re going to have for our state. And we were just talking about it earlier, like us in Mississippi.
Dan: Yeah. Us and Mississippi are ranked number one and two in the lowest credit scores. But you know what? We’ve been there for years.
Dan: So I tell people, don’t worry about it. We have programs to improve your credit scores. We work with some low credit scores. There are simple things that you can do to raise your credit scores. And there’s stupid things that you shouldn’t do that I see people do all the time that lowers there credit scores.
Dillon: And that is something that I absolutely want to talk to the buyers out there about, talk to your lender before you start what paying off things?
Dan: Do not pay off. The biggest stupidest thing I see people do is they pay off their collections and they think, well, my collections are a zero. I tell my clients, unless an underwriter tells you to do it, don’t pay it off. Do not pay off a collection. Unless the lender that you’re paying off will remove it. Because by paying your collection, you’re raising your DLA, which is your date of last activity. And now all of a sudden, this old collection is new. Guess what just happened to your credit score? Your new credit score just got lower, even though you paid the collection off.
Dillon: Right. So, there’s tons of different misconceptions. I would always highly recommend that you talk to a professional in the industry to help get you maybe to that point, to you get a better rate or there’s a different loan package. And speaking of that, what kind of loan packages do you see that are… or let’s do this. What’s one of your favorite loan packages right now that you’re putting out there?
Dan: The number one loan, I always ask every customer. Are you a veteran? Did you serve our country? Or do you qualify for VA? There is not a better loan out there. Number two is 85% of the state qualifies as for a USDA rural development. That is my number two. My number three is a loan called home possible. It’s a 97% conventional. And if your income is within the median income range in Oklahoma, you can get grant money. That’s money you get, you don’t have to pay it back. You don’t have to stay in the house five years, it’s yours, it’s done, it shows up at closing. And of course, you do pay taxes on it, but it’s free money.
Dillon: Right. And then earlier, just to make sure that everybody understands, you said it’s a 97% conventional loan, kind of explain… this is a type of jargon that if you don’t do this every single day, you may not understand. And maybe you felt embarrassed to ask, or maybe you just haven’t met the right person to ask. So that’s what we’ve got Dan on here today. So, explain kind of what that means to them?
Dan: Well, I use a good analogy, which I use for everybody. You take a hundred-thousand-dollar loan. 3% is 97,000. So, you have to put $3,000 down, if you get the $1,500 grant, you’re only into it for $1,500, the seller can pay closing costs and prepaid up to 3000. So literally for a couple of thousand dollars, you get into a loan that has one of the lowest interest rates, has across the board, the lowest mortgage insurance period. To make it even simpler, a 20-year conventional home possible loan payment is just a few dollars more than a 30 year FHA on a same hundred-thousand-dollar loan.
Dillon: And see, that’s what you’ve got to be able to talk to your lender and talk to professionals about, just because you’ve had one loan program that’s put in front of you doesn’t mean that there’s not a better one out there for you possibly, you get… That’s 10 years that you’ve knocked off paying that home….
Dan: That’s huge. That is absolutely huge. What I tell and this is what I educate my first-time home buyers. If you take that hundred-thousand-dollar loan, you make every payment for 30 years, at 23 years, nine months, you’ll be at 50,000. If you do that on a 20-year loan it will take you 11 years, 9 months, and a 20 year loan, the mortgage insurance drops off in 4 years, on a 30 year loan, the mortgage insurance drops off in 12 years.
Dan: The money you save is astronomical. Whereas if you go on an FHA loan that mortgage insurance never drops off until you refinance it.
Dillon: And what that means, it’s more dollars coming out of your pocket.
Dan: Yes. You’re spending a lot.
Dillon: That’s the big thing to take away from that there.
Dillon: So, don’t just be satisfied with that first loan program. Make sure that you’re calling, you’re talking to the professionals in the industry and that you’re really getting the best information that you can that’s available to you. Now I’ve got a kind of a two-part question for you here. And a lot of people… you may think the simple answer is pay off your debt or don’t pay off your debt, but let’s get it from a professional here. What is number one, the best thing you can do for your credit and number two, the worst thing you could do for your credit?
Dan: Well, I’m going to do the worst first, because it’s what most people do. They pay off their medical bills. They pay off their collections and they think they’re doing the right thing. Well, you just, as we talked earlier, just lowered your credit score. If you’re going to do that, talk to the collection agencies, say, look, I’ll pay it off. As long as you’ll remove from the Credit Bureau. Now, if you do that, that’s great.
And they will do it, because the collection can only stay on so long, after a while, they’ll pick up the phone and say, “okay, we’ll do it”. It’s amazing because something is better than nothing. The worst thing that you can do, the second worst thing is pay off all your credit cards and have a zero balance. Guys, I see this all the time, you know, I get these Dave Ramsey and I love Dave Ramsey.
Dan: They come in and they’ve got 20% down. They paid all their bills, they’re looking good, and their credit score is zero, because zero times zero is still zero. Whatever math you use, it’s still zero. Every time you pay off that thing, then you have a zero balance. And that’s all it is, a credit Bureau is a mathematical formula. So, zero times zero, the best thing you can do, the number one thing is a house, a mortgage. You can pay your mortgage on time, that’s going to have the most weight on a credit score.
The number two thing is a major credit card. And don’t really abuse that credit card, don’t go over the limit. Don’t go over 50%. If you can help it. Visa card, MasterCard, American express, you know, don’t leave home without it.
Number three that you can do is a car loan from a major lender, you know, a local bank, some of your bigger banks, and those are the top three. And most first-time home buyers usually don’t have one or two.
Dan: And so they have excellent in-fact, I’ve got a situation right now. Well, you know about it. Guy’s got three car payments paid. Excellent. His credit score is really low, that’s because all he has is three-cars and they’re all paid off. So, zero times zero. Well, that’s why the score is so low. It’s not that he has bad credit, it’s just doesn’t have the right type of credit.
Dillon: And it doesn’t even mean that you’ve… and this is the question that I get. Well, I’ve paid everything on time. I’ve paid it off. You you’ve done great. You’ve managed your money. You’ve done things right. It’s just, there is a game to be played and the score is your credit score. And that that’s what is going to be the driving force. So even if you think that you’re doing it exactly right, you may be hurting yourself than actually helping yourself.
Dan: You have to know the mathematics, because that’s all it is. Credit Bureau is a mathematical formula. If you know what the most weight on that formula is, you’ll win.
Dan: That’s all it is, is pure math.
Dillon: I love that. Now, Dan, if somebody had some more questions for you, if they wanted to get in contact with you, maybe they’ve watched the video and feel free to DM us or write a comment. We’ll make sure to get it to Dan, but to reach him directly. Dan, how can they get ahold of you?
Dan: Two ways. Call me on my cell. (405) 822-0141 or email@example.com or you can do hashtag Dan the man.
Dillon: I love that. Well, Dan, we want to appreciate you for your time today. I appreciate you coming out. Everybody feel free to give Dan a call. I know he’d be glad to help you, head over to pamrobinsonrealestate.com to find your next property. Give us a like, share, subscription on any of our social media. Hopefully we’ll be talking to you soon and getting you into your next property.