10 Common Mortgage Mistakes to Avoid
On this episode sponsored by LendKey, Tony Umholtz, a Mortgage Manager for IBERIABANK/First Horizon joins Tim Ulbrich to discuss 10 common mortgage mistakes homebuyers make and steps you can take to avoid them.
About Today’s Guest
Tony graduated Cum Laude from the University of South Florida with a B.S. in Finance from the Muma College of Business. He then went on to complete his MBA. While at USF, Tony was part of the inaugural football team in 1997. He earned both Academic and AP All-American Honors during his collegiate career. After college, Tony had the opportunity to sign contracts with several NFL teams including the Tennessee Titans, New York Giants and the New England Patriots. Being active in the community is also important to Tony. He has served or serves as a board member for several charitable and non-profit organizations including board member for the Salvation Army, FCA Tampa Bay and the USF National Alumni Association. Having orchestrated over $1.1 billion in lending volume during his career, Tony has consistently been ranked as one of the top mortgage loan officers in the industry by the Scotsman’s Guide, Mortgage Executive magazine and Mortgage Originator magazine.
Summary
Tony Umholtz, a mortgage manager for IBERIABANK/First Horizon, digs into 10 common mortgage mistakes to avoid what he sees people make in the home buying process. The first is not fully understanding in advance the common loan types and considerations or differences of each. Tony breaks down what conventional, FHA, VA, and other unique products, like the pharmacist home loan, are and what borrowers need to be aware of. The second falls into the category of credit blunders, like overestimating your credit score, relying on third-party services (which often provide inaccurate credit scores), utilizing no interest credit cards which could negatively impact your credit, and waiting too long to resolve issues you have with it. The third common mistake is not shopping around for a mortgage lender. Tony expresses that it’s important to find the right product and that some internet-based companies may be great for a mortgage refinance but are hard to work with for a home purchase. The fourth mistake is searching for a house before you get pre-approved. Tony shares that a pre-approval letter shows sellers that you’re serious and can also make you aware of any red flags you may have on your credit report. The fifth is underestimating how much cash you need to close. Tony explains that not only do you need money for a downpayment, but you always need to have money saved for an insurance premium (as well as possible flood insurance coverage), taxes, and closing costs.
The sixth is delayed communications with the lender, title agency, and real estate agents which can make or break a transaction. The seventh is making a home buying decision before you’re ready. Tim shares that you can’t make a decision about any part of your financial plan in a silo and have to consider how each will affect another. Number eight is not thoroughly evaluating how home buying fits in with other financial goals you may have and number nine is not thinking about the money you’ll need after you close for items such as furniture, lawn equipment, etc. The last common mortgage mistake to avoid is misunderstanding or misevaluating mortgage discount points. Tony explains that you should always ask for a no-point quote initially. He shares that points are essentially prepaid interest and that by purchasing a point you’re buying down the interest rate. However, he says that you really have to evaluate this decision and that it’s not always the best move to make.
Mentioned on the Show
- LendKey: Refinance Your Student Loans
- 5 Steps to Get a Home Loan
- Free Webinar: Home Buying in 2021…What You Need to Know
- IBERIABANK/First Horizon Loan: Get Pre-approved and Compare Multiple Lenders to Find the Home Loan That’s Right for You
- YFP 169: Helpful Tips for Getting a Mortgage
- YFP 136: The Ins and Outs of the Pharmacist Home Loan
- Buy or Refi a Home
- YFP Real Estate Concierge Services
- YFP 162: Credit 101
- YFP Planning: Financial Planning for Pharmacists
- YFP 190: 7 Ways to Reduce Your Monthly Housing Costs
- Real Estate RPh
- YFP 113: Is Your Home an Asset or Liability?
- Book a Discovery Call with YFP Planning
Episode Transcript
Tim Ulbrich: Tony, welcome back on the show.
Tony Umholtz: Tim, thanks for having me.
Tim Ulbrich: Excited for this discussion here in 2021 as we have you back, talking about 10 common mortgage mistakes homebuyers make and steps that folks can take to avoid these mistakes. And many of these come from either personal experience or ones that we know are often being made, so we’re going to go through these one-by-one and certainly lean into your expertise to hopefully give folks a guide of what are some things that they can be aware of going into the lending process, whether that’s a first-time home buy, second time, third time, or refinance and then hopefully put in some steps to prevent those from happening in the future. So Tony, the first one I have here that I know often comes up is that folks may not fully understand in advance the common loan types and the considerations and differences for each. And so before we talk about the pharmacist home loan through IBERIABANK/First Horizon aka “the doctor loan,” give us an overview at a high level of conventional, FHA and VA loans as I suspect those are the main ones our community will already have some familiarity with and perhaps some experience with. You know, generally speaking, how do these work? What’s the difference between them? And what are some important considerations for lendees when pursuing these types of loans?
Tony Umholtz: Yeah, sure. Great question. And that’s definitely the most common types of loans that are out there and that you’ll hear about. Fannie Mae and Freddie Mac, we call them the GSEs, which is Government-Sponsored Entity, they provide conventional financing. And thank God we have them, right? I mean, they really keep our housing market alive. And then we have of course FHA and VA loans, which are backed by — we call it Ginnie Mae, which is HUD, which is also a government program. And those are the main key loans that are out there. There’s also portfolio products, unique, nichey products such as the pharmacist product that we’ve discussed that banks, individual banks, can hold on their balance sheet as well, which don’t have a traditional investor, government-backed sponsors. But not to get too into the weeds here with that, but high level, I would say is conventional products, the main differentiation on that is they will allow a loan amount up to $548,250 in most markets. There is some markets around the country where that’s a higher number. So it’s just around San Francisco, Los Angeles, there’s going to be higher loan limits in certain counties in higher priced areas. But that’s one of the main pieces with them. And a conventional loan above 80% loan-to-value, PMI is required. And that mortgage insurance is required to deliver the loan to Fannie and Freddie. So that’s why it’s so important that you have this mortgage insurance, lenders require it, and that can be costly, right? That can be very costly. FHA and VA — let’s just kind of pull the two apart here — FHA, the Federal Housing Administration loan, is designed for a little bit more flexible credit. Although conventional loans can get pretty low on credit score too, FHA tends to be better if you have lower credit scores because it will allow lower interest rates, for the most part. FHA loans, though, typically don’t have a loan amount max as high as conventional. So for example, if a market’s $548,250 for conventional, it might only be like $325,000 for FHA. So I usually utilize FHA as a last resort, only when it’s the best loan for the client. And then VA of course is for veterans. And the VA loans are great. They allow 100% financing with no PMI. The only downside with VA is there’s a funding fee that’s rather expensive. So I’ve actually had a few veteran clients that we’ve actually gone conventional because it’s cheaper overall. But I could talk a long time on this subject. But hopefully that clarifies the main points.
Tim Ulbrich: Great overview. And to our listeners that want to learn more on each of those, you can check out Episode 169, Tony and I talked through helpful tips for getting a mortgage, going through different loan products, talked about the pharmacist home loan. And tony, we’re going to segue here and talk about that for a moment as I think your discussion on PMI is a good lead-in. And so as we think about the pharmacist home loan, you know, Tony, common barriers to pharmacists being able to purchase a home that I’ve seen is student loan debt, which of course can impact debt-to-income ratio, as well as their ability to save for a down payment. You know, they’re coming out of school, looking to buy a home, six figures or more of debt, and I think that’s where the pharmacist home loan can have its values. Tell us more about the pharmacist home loan option that IBERIABANK/First Horizon has, including minimum down payment, terms, requirements to qualify, PMI considerations and so on.
Tony Umholtz: Sure. The product we offer to pharmacists, it allows very little down payment and there’s no PMI. So it’s probably the key point to it. If you’re a first-time home buyer, you can actually put 3% down and have no mortgage insurance. And if you’ve owned before, it’s 5% down again, with no mortgage insurance. The minimum credit score is 700. And the one piece to this — and again, I don’t — I always try to avoid interest rates because they’re volatile and the market can move, bond market can move, but I have found over the last 18 months that I can offer better rates on this product than if I had a non-pharmacist customer come and put 20% down. I mean, it’s very strong interest rates. So it’s kind of — that’s been the few lead pieces that I’ve noticed. It’s just very strong 30-year fixed loan rates. And that no PMI is just huge. I mean, in some cases if you’re buying a $500,000 home and you’re putting 3% down, you’re talking about a $400 a month savings just for the PMI. So it’s a pretty substantial number. In regards to student loans, it has a — it doesn’t completely waive them. And I find most of my clients that I work with are under an income-based repayment plan anyway. And that’s what we’ll use in calculating a debt-to-income ratio. But in the case where there isn’t a payment, it uses a factor that’s lower than a traditional conventional loan or an FHA loan. So it enables more buying power.
Tim Ulbrich: Very good. And we covered the pharmacist home loan in a fair amount of detail, Episode 139, Ins and Outs of the Pharmacist Home Loan. Also, if you go to YourFinancialPharmacist.com, click at the top “Buy or Refi a Home,” you’ll see more information there to the IBERIABANK/First Horizon product as well as to the real estate concierge, Nate Hedrick, for those that are looking for an agent as well. And we’re excited about the partnership that we have with IBERIABANK/First Horizon because it’s nationwide. And we’ve got a nationwide community here in the YFP community. I have had the chance to work with Tony now for the better part of a year, love what he’s doing, his passion to educate and help folks on this decision and understand how it fits in with the rest of the financial plan. So that’s No. 1, not fully understanding in advance the common loan types and considerations and differences for each. No. 2 here, Tony, is credit blunders. And I’m thinking of those that perhaps may overestimate their credit score or perhaps not have a good understanding of how credit scores impact rates, maybe waiting too long to resolve credit issues and so on. What are some of the common mistakes and blunders that you see related to credit?
Tony Umholtz: The credit and the overestimate — you mentioned overestimating credit. I see that a lot. And you know, I think a couple things I’ll just touch on here with credit. One of the things as a lender, I try not to run credit unless we absolutely have to, right? There’s a lot of clients that’ll call and just want some high level information, but credit is so important because it’s such a critical part of the product. If you have a minimum credit score of 700 and you’re under that, it’s good to know why. And some lenders can — and we offer this service as well — we can give you ideas on how to improve it. We actually have score models that tell us what your score could go to by doing certain activities. But anyway, one of the big blunders I see is just totally following like a third-party monitoring service. And I don’t want to name too many names because there’s a lot of them out there, but traditionally, these third party services are going to overinflate your credit score more than what we would see. You know, like us as a — so for example, a creditor can see a score that is maybe 30 points on average lower than what you might see on one of these services. And I’m even — I subscribe to a service. I will say I do. But it gives me good trends as to what I’m doing, but it’s not what a creditor would see. So in my lifetime of lending, the highest credit score I’ve ever seen was 820, and it was an 80-year-old gentleman who had perfect credit his whole life. So it’s one of those things where, you know, a customer will say, “Hey, my score is 850!” Well, that’s what the monitoring service says, but it’s really not going to be that way when we see it. So that’s one thing, a blunder that I see. The other is a misconception on an inquiry as well. A lot of inquiries is not good. But a couple inquiries at one time for a loan is not going to have an effect on you. There’s a window of time where you can do this. That’s another piece. And then the other really important one — and I can’t stress this one enough — is the no interest for a year type cards and promotions that are out there. And it’s very tempting to go to Best Buy and they’ll offer a $5,000 credit limit for $5,000 worth of stereo equipment and maybe a CD or whatever it might be. And you don’t have to pay interest for two years, which is great, right? It sounds great. But what they do, they report that to the credit bureaus, to Experian, Equifax, and Transunion, as a 100% maxed out credit card. And I’ll confess as a young man, I was in my early 20s, I bought furniture for one of — my first house with a store called Rooms To Go, and I did this. And that’s how I learned. And of course, I’ve seen many clients do this since that time. But it actually happened to me personally. I said, “Wait a minute, why did my credit score go from 750 to 660?” And that was one of the things that happened. I did this credit, you know, it was a maxed-out credit card. That’s how it’s reported to the bureaus. So that’s another big blunder, Tim, that I’ve seen.
Tim Ulbrich: Yeah, and credit — great summary, Tony, great insights there as well. Credit, credit optimization, credit security, such an important part of the financial plan. Obviously we’re talking about here related to securing a mortgage, but generally just an important piece to consider. Tim Baker and I talked about this on Episode 162, Credit 101, talking about what is a credit score, breaking that down, six factors that can impact scores. So if you want more information and better understanding your credit, we’ll link to that episode in the show notes. So that’s No. 2 here, credit blunders. No. 3 is not shopping around. And I know, Tony, that rates, especially in a market where I feel access to information has become easier to find, if you will, that rates may be not necessarily what I’m referring to as much here, although that of course is a consideration. And I think in some cases, if you’ve got good communication with a lender and rates are changing that they’ll be in communication with you. So I think that relationship certainly is important. But obviously we know not all offerings are created equal. So here, we’re talking about the pharmacist home loan. Folks may or may not be aware of that. And so looking at a few different institutions, understanding the products that are out there, but what else, Tony? What are some things that folks may notice beyond the offering and perhaps beyond the rate that would be different from one bank from another? I’m thinking about things like application fees, document fees, other things like that that folks should be thinking about as they shop around.
Tony Umholtz: I really think the — and it can be very challenging sometimes with the shopping around because there’s different levels of knowledge out there. And some of the companies are just set up as call centers as they funnel internet leads in. You know, so there’s different knowledge bases that you’re going to speak to sometimes. So I find that that sometimes adds some confusion. But I think it is very important to find the right product. I think that is very much a critical element, so finding the lender that has the right product for you is important. And I never want to — I’m very sensitive to relationships. So I have people call me and say, “Hey, I have used this lender for 10 years and they’ve always been good to me,” and we’re a competitive industry but sometimes if I think something’s better, I’m very quick to tell that person, “This other lender has a better product.” So I think — and I actually have a lot of lenders that love to send me clients that they know we’re better fitted for. The fee part is important because there’s only really one set of fees the lender controls, and that is there’s a lender portion of fees. The rest are third party. So they’re going to be through third parties. It’s going to be the same, really no matter who they use. So that’s one thing I find that confuses a lot of people is consumers will lump in the prepaid expenses, taxes, insurance, title insurance as well, and doc stamps for the state we’re in or the county recording fees. But those are going to be the same costs no matter what. There’s really only one line item of lender fees that are going to be different, that could vary. So that’s one way to look at the lender is just lender fees and interest rate. Really, it’s as simple as that. But the big things I find when you’re looking, when you’re out there — and again, I’m not going to name names of companies — but when you’re looking to buy a home and you have a — there’s a lot of companies that have popped up, especially internet-based companies that are really just feeding off the refinance market. It’s hard to be equipped for purchases because when you go under contract for a purchase, you have a commitment letter date, right? There’s a commitment financing contingency, there’s appraisal contingency, there’s all these contingencies in a contract, and you want to make sure the lender is watching this and can meet these milestones. A lot of lenders that are set up for refinances just aren’t set up for purchases. It’s OK to use one of these lenders if you can wait 90 or 120 days to close your loan for a refinance, but on a purchase, you can’t do that. So service is very important when you’re buying a home. It still can be with refinancing, but you can always just wait longer, you know? It’s one of those things. But I would just say, you really have to be careful with the service aspect when you’re buying because it’s a very competitive housing market right now, and a lot of these sellers have backup offers. I get calls a lot too because people are under contract and something went wrong with their lender, and I have to jump in sometimes. So I see it even as a secondary lender when things go wrong with the original lender. So I would just say the big thing is a comfort level with that person and that organization. The best rate and product is important too but also making sure that you’re in the best fit for you because one other thing I will say is, you know, if you can get a better rate putting 30% down than you could putting 5% but that’s going to use up all of your liquidity and maybe impact other financial planning aspects of your life, well, the 5% is much better, even if the rate’s a little higher. So I think it’s very important to plan, look at your overall plan. That’s why the folks at YFP are so great to work with because they can look at everything and say, “Hey, this is better for you in the long run because of this.” So I hope that’s helpful. I mean, there’s a lot of components to it. There is a lot of things to think about, but I think it’s really finding a comfort level with the group that you want to work with and especially if you’re buying a home.
Tim Ulbrich: Absolutely. So point No. 3 there, not shopping around, I can speak from personal experience working with more of a big box company, obviously having the opportunity to work with you guys, open communication lines, feeling comfortable with the process, getting questions answered, all of that really matters. No. 4 here is looking mistakes — again, we’re talking about here looking beyond the simple Zillow or Redfin search before you get preapproved and know what you can borrow, which is not necessarily, of course, the same thing as what you can afford, right? We talked about this with Nate Hedrick on the podcast a lot, the Real Estate RPh, what you can borrow, what you get approved from the bank, is not necessarily what you can afford. And that connects, Tony, to what you just said about connecting this home buying decision with the rest of the financial plan. So talk to us here briefly about the importance of the preapproval process.
Tony Umholtz: The preapproval process is critical just to know what you can afford both ways, right? To see if that Redfin search popped up a house that you can’t buy. I’ve also seen it the other way around where, you know, with the rates being so low, clients have said, “Hey, I’m paying $2,900 a month for rent and I can buy more house than I thought I could.” So it’s really just critical in the education process. You know, knowledge is so important. And just knowing what you can and can’t do is important. And the preapproval process will allow us to see if there’s any red flags as well. We’ve had lots of clients that we’ve been able to help get their credit scores up a little bit higher, we’ve had lots of clients that both ways have said, “Hey, I don’t want to buy a home this large because I didn’t realize that this is the cost and the taxes are this.” On the other side, I’ve seen it the other way too, like I mentioned. It’s very important to get pre-approved before you start walking into houses. And I will say that the realtors are very proactive right now because of the tight inventory. We get a lot of phone calls from the listing agents, even. And of course, we can’t give much information away, but they’re calling us, “Hey, are these clients approved?” I mean, it’s a different market in a lot of parts of the country right now.
Tim Ulbrich: That makes sense given where we’re at and the climate of the market. So No. 5 is underestimating the cash to close. So what I’m referring to here, Tony, speaking from personal experience in our first home purchase a little over a decade ago is I think many folks when they’re looking, you know, look at the sale price of the home, they might say, “OK, I’m going to be able to negotiate this or this,” which might be overconfidence, especially depending on what’s happening in the market. And they’re probably thinking about the down payment, whatever that would be, 5%, 10%, 15%, 20% down. But they might not be thinking about other costs that they’re going to need to consider having cash to come to the close. So tell us about not numbers, per se, but what are some of those other things that folks need to be thinking about when it comes to cash to close beyond just the down payment?
Tony Umholtz: One of the big pieces too outside of the down payment is your insurance premium. And insurance is due upfront, full year premium upfront, even if you paid cash, you have to pay for your insurance premium upfront if you want your home insured. And I find that — and this is flood insurance as well if you’re in a flood zone, that’s due as well — but the insurance component is something you have to take into consideration. The other piece outside the down payment is your tax allocation. So normally, lenders will take anywhere from 3-4 months of your property taxes for the escrow account. And for example, the reason for 3-4 months is there’s always a two-month cushion that’s collected. But there’s also, you know, let’s say we were to close today, right, on a house, Feb. 5, your payment is not going to be due — your first payment’s not due until April 1. So we have to collect February and March to be on pace to pay it for you, so we’re going to collect four months of taxes at closing to kind of cushion things. And then of course you have closing costs as well. So there’s a prepaid element and then we have the closing costs. So in addition to the down payment, you have those elements as well. The other thing to keep in mind too that is some confusion that I see a lot with first-time home buyers especially is when you give a deposit on the home, so let’s say when you give your realtor, your realtor goes to help you with the contract, you have to put $5,000 in escrow or deposit — terminology is about the same but different parts of the country call it something differently. That $5,000 gets credited back to you at closing. OK? So it’s a contribution to the overall transaction. It’s not something that you lose or gets lost in any way. It comes back to you. So if your cash to close let’s just say was $10,000, and you’ve already given $5,000, well, you only are going to bring $5,000 to the closing. So that’s another piece just to — questions that come up.
Tim Ulbrich: Very good. And I think the point here I want to make, especially for folks that are on the home buying process for the first time is making sure you’re appropriately considering what might be the cash needed, down payment, closing costs, you mentioned the insurance, the taxes, and some other things as well. So making sure to plan for that in advance and of course thinking about how that impacts other parts of the financial plan. So we’re halfway through our list of 10 common mortgage mistakes to avoid. We’re going to rapid fire these last five. No. 6 here is delayed communications with the lender, title company and agents. Lots of folks involved, Tony, in this process, lots of moving pieces and parts, and I suspect this is the time to overcommunicate and set communication expectations with the team in advance. So talk to us about from your perspective, you know, what you’re expecting of your — obviously your team but also in terms of folks that are working with your team when it comes to communication.
Tony Umholtz: I mean, communication is critical. And that’s what makes the transactions — makes or breaks them in a lot of ways, the communication. So we really try to communicate — overcommunicate with the client. The title companies can be tricky because some of them are, you know, larger, big box, and they’ll just send blanket emails out and it’s hard to get in touch with someone individually. But I think it’s — you know, one of the things that I think is critical is that we know who the realtor is, and we know who the title company is. And then we know the individual in contact. And it usually goes very smoothly if that’s the case. So just having everyone on board. Normally the realtors are very important for us to know because we have to coordinate, we have to give the appraiser their information typically, just to show the house. But yeah, the title company portion is very important, especially as we get closer to closing because the bank or lender’s closing department is going to communicate with them and balance the figures for closing.
Tim Ulbrich: Very good. Yeah. I think with lots of parties involved, communication — always two-way, but making sure that you’re being proactive in that and of course if there’s questions that are outstanding, making sure you’re reaching out and vice versa to stay on time and on track with closing. I’m going to take No. 7, 8 and 9 because they hit home for me personally. And then we’re going to bring back Tony here to talk about No. 10 related to mortgage discount points. No. 7 is making a home buying decision before you are ready just because “rates are good” or because I’m renting and “throwing money down the drain.” Now we’ve talked about this extensively on Episode 113, Is Your Home an Asset or a Liability? We’ve talked about not only the pressures to buy a home but also the costs of home ownership and comparing renting versus buying. And so I would encourage folks, as we say on the show over and over and over again, to avoid the trap of making any financial decision in a silo. So here, if you’re talking with somebody and rates are good or you see commercials about rates or that’s the center of the conversation or somebody says, “Hey, why are you renting? You’re just throwing money down the drain,” now, you may conclude that it is the right time to buy. But the point I’m making here is to take a step back, what else do we have going on in the financial plan, working with hopefully a financial planner to help you evaluate that decision, look at all pieces of the puzzle, and then proceed with the home buying decision and the budget to buy a home if it makes sense in the context of your plan.
And that really is No. 8 in terms of these mistakes is not thoroughly evaluating how home buying fits in with other financial goals. And so I think as we talk about extensively, you know, if you’re looking at six figures of student loan debt, you’re looking at investing goals, you’ve obviously got other competing priorities for your finances, home buying just being one of those, how does it fit in? And of course, YFP Planning, our fee-only comprehensive financial planning team can help that. You can schedule a free discovery call, learn more, at YFPPlanning.com.
No. 9 mistake here is not thinking about available cash post-close. So we talked about how much money you’re going to need to be able to come to closing. But what about things like a rainy day fund to make sure that if something goes wrong in the home? What about things like furnishing the home? What about things like yard equipment? And so thinking about not only the cash that you’re going to need to bring to closing but also do you have some reserves? Do you have some cushion? What will that look like month-to-month as well as some funds that you have in reserves to be able to handle some of those expenses that will inevitably come after you move in?
And Tony here, No. 10 in our list of 10 common mortgage mistakes I think is misunderstanding or evaluating mortgage discount points, especially as folks are comparing rates among institutions or even within a lender. So talk to us exactly about what are discount points? And ultimately, how folks and tips for folks as they’re evaluating discount points as an option.
Tony Umholtz: I would recommend that you always ask for a no-point quote initially because, you know, some lenders will put that into their pricing. It’s funny, even the Freddie Mac that are posted in the Wall Street Journal, they typically have .6% points in the quote. So you know, I always say that if I put that in there, the rate would be even lower. But that’s really the important element is discount points — let me explain what those are. They are actually — it’s defined as prepaid interest. So you’re basically buying down the interest rate and for a finance person, it’s like you’re buying down the bond rate over time by paying the points at a premium. It sometimes can be a good investment. But most of the time, I don’t recommend it. And the way that you can tell if it’s a good investment is traditionally, on a 30-year fixed, 1 point will typically buy down a .25% in rate, typically. Sometimes ⅜ of a point. Well, over — let’s say it’s .25%. Over four years, you basically pay off the point you paid and then you’re kind of in the money, so as long as you own the home more than four years, you’re in the money. And then a lot of times, depending on your tax bracket and everything, you can write off that point in the year that you pay it. So if it was 2021 and you paid 1% on a $300,000 home let’s say, that would be $3,000. But you know, the spread in rate is important in determining if paying points makes sense. But I find that it typically is not the best way to go unless there’s a big spread. Like I had a — there was a time earlier in the year, especially on jumbo mortgages, larger loans that are above the conventional limit, where we were getting a half point for 1% fee. Well, that made sense all day because you had a two-year payback period on a 30-year fixed. Then you were in the money for a remaining 28 years if you stayed there. So for long-term people who are going to be in the home or own the home long-term, it can make sense sometimes. But to compare lenders, you really just want to ask, like if one lender offers you 2 — this is just throwing out numbers — 2.75% with 1 point and the other one offers you 3% with no points, you can ask the 3%, “Hey, if I was charged 1 point, what could I get? What could my rate be?” And if they came back and said, “It’s 2.625%,” well the offer from the higher rate person is actually better. So that would be one way to compare. But that’s a quick summary of points.
Tim Ulbrich: Yeah, great discussion there of points. I know that comes up a lot, and I think what we’re trying to get to, Tony, is an apples-to-apples comparison the best that we can to evaluate it. And I think you bring up another good point in that discussion, which is the longevity that you may be in the home. And I know that’s an important consideration, one that folks may not be able to predict in advance but to try to objectively evaluate that the best you can because that’s going to impact when you think about rates of the loan, you think about things like points, when you think about down payments and other issues and having to be able to expense a move in the future and closing costs and selling the home, you know, if that runway’s going to be long versus that’s going to be potentially short, that could have a significant impact on many parts of the home buying process. So there you have it, 10 common mortgage mistakes home buyers make and steps that you can take to avoid these mistakes. And to learn more about considerations when getting a home loan and to get more information about the pharmacist home loan offered by Tony and his team at IBERIABANK/First Horizon make sure to check out the post on the YFP site titled, “Five Steps to Getting a Home Loan.” And you can get there by visiting YourFinancialPharmacist.com/home-loan or if you just go to the main page, YourFinancialPharmacist.com, top you’ll see “Buy or Refi a Home,” and that will get you there as well. So Tony, appreciate your expertise as always and appreciate you taking time to come on the show today to talk about this important topic.
Tony Umholtz: Tim, thanks for having me. Really enjoyed it. I always do, and you know, appreciate being a partner with you.
Tim Ulbrich: Thank you very much. And as always, if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, please do us a favor and leave us a rating and review on Apple Podcasts or wherever you listen to the show each and every week. That will help other pharmacy professionals find this show. Appreciate you taking the time to join us. Have a great rest of your week.
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