Strategies For First Time Home Buyer Strategies In Sonoma County

Hi there, Bridget Mackay with the offices of Bridget Mackay in Petaluma. We practice in estate planning and elder law. I’m here with Jeremy Forcier from Peoples Home Mortgage.

Jeremy: Hello. Thanks for having me.

Bridget: And today, we’re going to talk to Jeremy about first time homebuyers. Some strategies in this tight market we’re having. So, Jeremy, you’re a lender. So that’s one of the key pieces for those families, especially young families trying to go out buy their first home and sort of, what is looking like a pretty high and overbidding, crazy market. I had a house in my neighborhood that went on the market for $650,000 and sold for eight. I mean it’s just seems crazy out there.

Jeremy: That’s crazy.

Bridget: I mean maybe that was an anomaly, but…

Jeremy: Or, or an existing strategy. Obviously, it was worth $800,000 because it sold. Yeah. So, I mean, the number one thing, a tip or recommendation I’d give to anyone buying a house for the first time is to sit down with a trusted mortgage lender first. I mean, usually that’s an afterthought. Because you get emotionally excited about buying a house and what it’s going to be like and all that stuff.

Bridget: I mean on that point I was just thinking like it’s, you know, and then there’s these apps, Rocket Mortgage. You know, all those things. You really lose that interpersonal piece where someone can really look at your finances.

Jeremy: Well the reality is, whether it’s Rocket Mortgage or any other forward facing… it’s just a point of sale application. That’s just to get your information. There are still people that have to do all the work. And I think that’s a big, like, misconception that we think that we can enter in stuff and you have a loan.

Bridget: And the computer figures it all out.

Jeremy: No, that it’s actually not true at all. There’s a lot of artificial intelligence that can figure out certain things, but you’re always going to have to verify it with documentation. So, where I always start with anyone buying a house, whether it’s a first-time homebuyer or second time third time, doesn’t matter. Is this one question – where do you want your monthly budget to be for your mortgage payment? No one ever talks about that upfront. Everyone talks about how much do I qualify for? Well that’s subjective, your budget is subjective to you, based on your lifestyle and how you live. And so, I always start there. It’s what do you feel comfortable paying on a monthly basis? Because sometimes I can prove people to way more than what they want to pay. And that’s a waste of time. Gets your hopes up. You can make a bad decision; emotionally overpay for something that you know. So, I think that’s where everyone should start, is simple fiscal literacy of like a personal budget.

Bridget: OK. So, once I have my personal budget ready. You know, what are some of the things, strategy wise, to go out into this market to be competitive?

Jeremy: Sure. So, there’s basically three different stages of preapproval. So, preapproval has been a word that almost means, it doesn’t mean anything anymore.

Bridget: Oh Really?

Jeremy: And the reason why is because a preapproval used to be, 14 years ago, you’d get all of your documentation into your lender. Your tax returns, your W2’s, your paystubs, your bank statements. All your stuff and then they review it and they say ‘OK, you fit the guidelines. You’re qualified, here’s a preapproval letter’. With technology what has happened now is that you’re preapproving people subject to information they just entered into something without verifying.

Bridget: Oh, so there’s none of the hard copies?

Jeremy: Right, without verification, right? So, hey ‘you’re pre-approved, subject to ABCDEFGHIJKLMNOPQRST’… you know what I mean? like, but all anyone sees is ‘I’m preapproved’. So, all previous rules are not created equal. So, basically there’s three stages in my opinion. There’s prequalification. And prequalification is really just; you get your credit run. You fill out, we get some basic information about your finances and we see, do you qualify from a credit standpoint and what you think, keyword think, what you think your income is. Most people don’t know. It’s true, it’s fact. Like, they say one thing, it never matches up with the documents that you get.

Bridget: Interesting.

Jeremy: Sometimes they make way more, sometimes they make way less. It’s just like, interesting right? So, it shows the disconnect we are in America with our finances. But, it’s important to know that, that step one is prequalifying, right?

Bridget: Sure.

Jeremy: Now then we’ll ask for all the documents that will need to substantiate that. So, in my, at my firm, in our company. We don’t issue any p reapproval letters ever, until we verify the documents. Because, that way that person truly is pre-approved.

Bridget: And that’s what the real estate agent will be looking for.

Jeremy: What everyone wants, I mean, is a real preapproval. Now, we go one step further than that. Is that, we’ll fully underwrite and approve your file before you go make an offer on a house.

Bridget: What does that mean?

Jeremy: So, this is what most people don’t understand, I’m a salesperson. So, I’m in sales. Yes, I need to know how to qualify people and all that but I’m not the underwriter. The underwriter is the one who actually makes the decisions at all mortgage companies everywhere.

Bridget: And you don’t really need the underwriter?

Jeremy: No, the underwriters like The Wizard of Oz. Right? It’s the person behind the curtain who makes all the decisions and the rules. So, what we do is, if the client will give us all of our items upfront, basically we’re, it’s almost like pretending that we’re buying the house.

Bridget: Ok, and you send it to your underwriter.

Jeremy: And we will, and they will fully underwrite it and get a real, legitimate approval. Now that’s like having the Willy Wonka golden ticket.

Bridget: Right.

Jeremy: That’s when you can make offers with no financing contingencies even if you’re getting a loan. You can close in 15 days or less if you want. You can do all kinds of stuff and have flexibility. But the number one benefit is peace of mind. Like people don’t, they under estimate because they don’t know. Right? That, like, hey when you get preapproval from 90% of other lenders, it’s still going to be really stressful when you get into contract because they’re gonna, it hasn’t gone through underwriting yet.

Bridget: Right.

Jeremy: And they’re going to ask for all kinds of stuff. And it’s stressful. I want to eliminate the stress before they’re in escrow because it’s stressful enough.

Bridget: Before they even make an offer it sounds like?

Jeremy: Yes, it makes a big difference. So, those would be my recommendations for anyone. Especially first-time buyers making offers in this market right now.

Bridget: OK great. Thank you.

Jeremy: Thank you.

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