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Episode 16: The Basics of Home Loans with Matt Gray

May 16, 2022

If you’re thinking about taking that next step into the home buying process, you most likely have questions. But before you get too deep into the process, you need to listen to this episode! Matt Gray, a mortgage loan originator at AgCredit answers the top list of questions he gets about the home loan process. We cover a lot of ground in this episode, from the difference between an inspection and an appraisal to credit score criteria, and even pole barn homes, we break the basics down on mortgage loans so you can confidently approach the process.

Here’s a glance at this episode:

[1:40] Whether you are buying a fixer upper or constructing your dream home, each loan process is unique.
[4:14] AgCredit might be known for agriculture loans, but they also do home loans. They have an in-house residential team.
[6:56] AgCredit has a specific loan program for pole barn houses - a newly popular shop/house structure that must be made up of more than 50% of living space.
[10:32] A top question Matt often gets asked is, “Will my loan be sold?” With AgCredit, loans remain. They do not sell the loan nor the servicing.
[12:41] A second top question Matt gets asked is if the borrower has to be a farmer to get a home loan. The short answer is no, you don’t have to be a farmer or have farm income to get a home loan at AgCredit.
[15:34] For young people getting started with the home loan process, having a job with stable income is a basic requirement and having a little bit of money set back in the bank is always a good thing.
[20:09] During the process, you will need to fill out a loan application that asks for basic financial information, like past years’ tax information, W-2s, pay stubs and bank statements.
[21:09] According to Matt, your credit score is “your foot in the door”. It’s important to establish healthy credit from an early stage.
[24:30] To fix bad credit, consider a low limit credit card for gas or groceries that gets paid off each month.
[27:17] Lot loans are used to purchase a piece of land to build your future home on. The land can be financed and later rolled into a home construction loan.
[32:45] Pre-qualification comes before pre-approval. Pre-qualiftican is simply a loan application and a credit report. When pre-approval is granted, that’s when you can make a purchase on a house.
[35:14-37:31] Matt explains the purchase process.
[38:56] A home inspection consists of paying for an individual to come out and check specifications in your home so that you can know about any deficiencies or things that will need maintenance in a few years.
[39:49] An appraisal gives your property a current market value and allows your lender to confirm they are lending you the proper amount.

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Bios

Guest Matt Gray

Matt is a mortgage loan originator for AgCredit serving Wood, Lucas and Henry counties. He has spent the past 15 years with AgCredit and has been in the industry for 20 years.

Host Phil Young

Phil is an account officer for AgCredit serving Van Wert County. He’s been in ag lending for over three years but his agricultural background goes back much farther. He grew up on his family’s farm where his father raised a large herd of sheep. Currently, he helps with the family farm raising corn, soybeans and wheat. Phil likes working at AgCredit because he can help people achieve their dreams. Whether that is purchasing a new piece of farm ground, updating a piece of equipment, or helping a borrower understand their financials, helping his clients succeed is always his goal.

Host Libby Wixtead

Libby has been an account officer for seven years serving AgCredit members in Marion County. She grew up on a 200-acre grain farm and was very active in 4-H and FFA. Today, Libby and her husband operate a 2,400-head swine finishing barn. Her favorite thing about working at AgCredit is working with local farmers from the same area where she grew up and seeing their operations thrive. She loves working in agriculture and helping her customers be successful year after year.

Transcription

Voiceover (00:02):Welcome to AgCredit Said It, the podcast for farm newbies and seasoned professionals alike. In each episode, our hosts sit down with experts from across the agriculture industry to bring you insights, advice, and must have information on all things rural living, from farming to finances and everything in between. So let's get to it.

Phil Young (00:27):Welcome back to another great episode of AgCredit Said It. Phil and Libby are here today, and we're going to talk a little bit about home loans, which is a hot topic. There's a lot going on in the housing market. So whether you're buying, refinancing, whatever it looks like, excited to talk about homes and home loans today. And Libby's here, so how are we doing Libby?

Libby Wixtead (00:48):Doing great today. How are you today, Phil?

Phil Young (00:49):Doing great. Doing great. Are you a homeowner?

Libby Wixtead (00:50):I am.

Phil Young (00:50):You are, okay.

Libby Wixtead (00:53):I am.

Phil Young (00:54):Have you had multiple homes? Have you had one house? Have you done this multiple times with home loans?

Libby Wixtead (00:59):So when I first got married, my husband had a house already. So then a couple of years ago, we purchased our first home together, I guess you could say. You would think that as a farm loan officer, I would have known everything that was going on with the home loan process. But it is quite different from a typical farm loan, so there were a lot of things that were new to me. And I don't know if... I think this is our forever home, so I'm not sure if we'll go through this process again later in life or we'll build. But it was a good first experience. And, of course, I went through AgCredit for my home loan.

Phil Young (01:40):Nice. It is a different experience. I'd rented for my first few places with my wife and then, I think, gosh, we rented three different houses and then we ended up buying one, and it was the definition of a fixer upper. So I think there's cars now that are more expensive than my house was. So I bought it and then spent a lot of blood, sweat, and tears, fixing it up and stuff. And eventually sold it and I made money, which is a good thing to have happened. Then my second house, I ended up building a house, and so that's the one I'm in now. So whether it's buying a fixer upper or construction loans, they're all unique in the process. I'm glad we have Matt here to help us walk through what the world looks like. It is an adventure, there's just checklists and things you have to have just like with anything else. So good time to transition and focus on Matt Gray who's our guest today. He's a mortgage loan originator for AgCredit. So Matt, can you introduce yourself and share a little about yourself?

Matt Gray (02:45):Sure. Well, my name is Matt Gray. As you said, I'm a mortgage loan originator here at AgCredit. I work in the Napoleon and Bowling Green branches here covering Henry, Wood and Lucas Counties. And we can span out a little bit further than that with the way we do our home loans here. A little bit about me, I've been here for about 15 years now, in the business for about 20. I've got a family of five, my wife, Tina, my oldest daughter, Emerson, my middle boy, his name is Ethan, and our youngest's name is Hadley, and she's a spitfire.

Matt Gray (03:26):So they take up quite a bit of my time. But when I'm not at home spending time with family, I'm here with my AgCredit family doing home loans. So I'm glad to be here. Hopefully I can shed a little bit of light on the home loan process. As Libby mentioned, it is very, very different, a lot of consumer stuff tied into that process. So we like to say we will try to make it as painless as possible. I don't like to use that term because it can be very smooth and easy going. But for the most part, you'll be asked for things that you just normally wouldn't need to come up with on more of a typical financing situation.

Phil Young (04:14):We thought this would be a great podcast just because AgCredit, we're known for ag loans. And I feel like home loans are one of those things where it's like, "Oh, you guys do home loans?" It's like, "Yeah, yeah, we do that." So we thought this would be a great opportunity for you to share how we intersect that market and how we can help people out.

Libby Wixtead (04:35):Matt, can you first start off and tell us some programs that AgCredit has for our home loan department or that our residential team will be talking about with some of our customers?

Matt Gray (04:49):Absolutely. Well, I would say we would be defined as a full mortgage service lender. And we are unique in that we holded a great deal of our loans here. Not all of them, but many of them, we hold and service right here at AgCredit. A lot of folks nowadays, anyway more than ever with all the information out there, most people seek out general loan information before they reach us. For those that are doing so, the myriad of mortgage products that are out there, whether it's conventional loans, you'll hear that term, FHA, VA, USDA, construction loans, we offer the whole gamut here. So there's not a loan that we're not going to offer here other than maybe specific loan programs that maybe are specialized in the banking industry. But otherwise if you come here and you're seeking one product and it just so happens you're a better fit for a different product, that's how we operate. We try to match you up with the best and most appropriate program for you in your situation at that time in your life.

Libby Wixtead (06:14):So one of the things that I really like about our residential team, I guess our department, is that we do have in-house loans. So that is one thing that is, I think, very unique. That you can come into one of our branches and actually come and see you, Matt, and you are the one that's dealing with our loan. And we can ask you questions rather than being sold off to another company. So I don't know about you, Phil, but I have gotten a lot of phone calls lately about barndominiums.

Phil Young (06:45):Yes.

Libby Wixtead (06:46):So is that something that you guys have seen an increase in? And is that something that AgCredit can do home loans on?

Matt Gray (06:56):Absolutely. We have a specific pole barn house program for the purpose of whether that be to purchase an existing barndominium, a pole barn house. There are many names used.

Phil Young (07:11):Shelves.

Matt Gray (07:12):... for that type of property. But they are becoming more prevalent. And if nothing else, I am getting calls usually several times a week on properties of that nature. Now, with the program available, there are some certain stipulations. So if you're someone that's out there that's interested in what it would take to either build or buy a property of that type, just give us a ring. There are certain requirements for the percentage of living space within that structure and things of that nature.

Matt Gray (07:50):But at the end of the day, and any lender will tell you this in the industry, that's a challenging type of property to get financed for many reasons. But that's why we put a program out there because we were getting more and more folks interested in that type of property. We really want to build our volume with that segment and provide some type of financing for people like that. Because, like I said, it's becoming more and more prevalent and there's just some details there that need to be discussed. But we are excited and happy to be able to offer those types of opportunities. I've seen some pretty neat pole barn homes.

Phil Young (08:37):They're gorgeous.

Libby Wixtead (08:38):Yes, very.

Matt Gray (08:39):Some of them are just immaculate. You don't think of just a pole building, walking into a barn and living in a barn, no, no, no, no. They're just as decked out as some of the most high end homes you've ever seen.

Phil Young (08:52):And really I've seen even the resale value, they've been... They're newer obviously, they've been around long enough now that you've seen some resale is what it seems like. You've seen people put them up for sale. They've been selling just as good as other houses. So I think the concern early on was, if you build one, is it going to hold its value or is it going to shoot down in value because who wants one? And I think they're here to stay is what it seems like.

Matt Gray (09:19):I think it's all boiled down to the way they structured that program, how much of the space is finished. Because there are some properties like that out there that are started as a pole barn house but the entire thing is finished. So when we see a property like that, we treat it no differently than we would one of our rural home lending programs. We can go up to the same percentages on lending and things like that because when the whole space is finished, then the appraisers are okay with using standard stick-built homes as comparables in their appraisals. And that's where some of the challenges have always come in with those types of properties. So if you've got any of those thoughts in mind and want to just do a little bit of research and see what it would take to build such a property, give us a call, and we'd love to discuss that with you.

Phil Young (10:18):Nice. It just seems like AgCredit's that niche lender for this. There aren't a whole lot of lenders doing it.

Matt Gray (10:25):It seems like a good match.

Phil Young (10:26):Yeah, it does.

Matt Gray (10:27):It was a perfect fit. So I think it's a good thing that we finally developed a program for those folks.

Phil Young (10:32):Libby, actually you shared something when you started talking about AgCredit not selling loans. And I think that's... Gosh, it's probably been, I don't know, 10, 15 years ago now, before I worked at AgCredit, I had a loan. I lived in Indiana, I closed on a home loan, and literally I think it was a month after I closed on it, my loan was sold to somebody else. I probably got, I don't know, three notices over the next three years of my home loan being sold. I just one to clarify, we don't sell any of our home loans, we don't sell. Once you close it with AgCredit, it stays at AgCredit as far as home loan-wise.

Matt Gray (11:05):Correct. When we do an in-house loan, and we can talk about that in a bit here, but we have two different ways really to put people in the right loan for them. I would say primarily, we want to keep all of our loans here. There's a lot of different advantages to that. So that's where we will go first and no. Those loans will remain here, we do not sell the servicing nor the loan, it stays here. So you can do all your servicing, you can call your loan officer if you need to at any time and ask any questions. When we have something that maybe just fits outside of our scope here, we offer loans just like all the banks do. We offer Fannie Mae stuff, Freddie Mac stuff, Jenny Mae, which is the government programs like FHA, USDA, and VA.

Matt Gray (11:59):So we have a wide selection of programs to offer no matter the situation. But I'd say that's a top five question I get when folks call in. "Is my loan going to be sold?" Because they've been through the gamut. And not that all those situations are bad when your loan gets sold in the servicing. Because sometimes it's just a letter in the mail and you don't know any different. But other times it can go very, very wrong and people just end up with a bad taste in their mouth. So we are excited that we can hold loans here and service them. I think it adds a lot of value to what we bring.

Phil Young (12:41):I agree. And I get this question a lot, obviously we're an ag lender. I get phone calls and they're like, "Hey, I don't farm, I don't own any farm ground, can I get a home loan here? Will you guys do that?" I guess can you share, do you have to be a farmer to get a home loan here?

Matt Gray (12:57):No. But it's funny you say that and put it that way because even today, we still get folks that, whether it's somebody popping in or you see them on a weekend, there are still folks that don't realize we offer home loans. And I think it's just because we're so deeply rooted in ag and agricultural type of loans that that's at the forefront. That's what people think of immediately when they hear our name, it's AgCredit. But absolutely, we want to be there and we want to be in this market. We've done a lot of tweaks over the years to remain competitive in this market. So the short answer is no, absolutely you do not have to be a farmer or have farm income to come here to AgCredit to get a home loan and for us to look into what we can put together for you, as far as a financing package goes. It's nice to have some farm income in certain situations, certainly not a necessity.

Libby Wixtead (14:05):I think that comes back to the farm credit mission. We serve our rural community, not just necessarily farms. So that's just something to keep in mind, that any farm credit is here to serve the rural community in all aspects.

Matt Gray (14:21):Correct.

Libby Wixtead (14:21):That that entails. So let's say, Matt, that Phil and I are looking to purchase our first home or just another home in general. What would you say the first thing is that we should do, other than call AgCredit?

Matt Gray (14:37):Other than calling AgCredit, other than calling your loan officer. Well, that was going to be my number one thing, call your loan officer. Well, I think the first thing to do, and this is because we're in the information age, there are some things that you can research a little bit on your own to just get a standard idea before you even call a loan officer. See what those basic requirements might be for you. At a very minimum, you're going to find things like, well, you should probably have a job for a couple of years, you should probably have some stability there that you're going to turn over that financial information to someone that's going to review all this stuff. So in your mind, you have to think, "Well, I need to be presentable and have a foundation underneath me if I'm going to borrow thousands of dollars."

Matt Gray (15:34):So having a job and being stable in that respect is good. Having a little bit of money set back in the bank is always a good thing. Now, there are some different areas there where there are certain programs that will help if someone is deficient in a certain area. But it's hard for me not to say call your loan officer first because I feel like if you're someone that's just completely green and you just don't know anything about it and maybe you're someone that doesn't trust the internet and all the information you're reading on there, reaching out to your loan officer for them, even if you're a year out…

Matt Gray (16:18):I talk to so many people, young people specifically, that call and say, "I have no idea what I'm doing or where to begin." And those are some of the most fulfilling people that I work with, are the ones that I can help from square one and say, "Hey these are the things, these are the puzzle pieces you need to get in place and you're going to be set in good." A year from now, maybe I get a call back and these folks take some advice and they're well set up and they're ready to move on to maybe looking at a property and making some offers and financing their first home.

Libby Wixtead (17:04):It sounds like building the relationship is the first thing, which is what I think AgCredit prides ourselves on. And then also just planning ahead of thinking about, okay, these are the items that we need to have to be able to purchase our first home or purchase another home. I really think you guys are put in a tough situation because people don't buy homes every day. I think, Phil, you and I, people are buying farmland every year or two farms a year, we're at homes it's like, okay, you maybe do one, two. Well, even with our ag customers it's probably one time maybe. So I feel like having and building that relationship is a good thing and being able to plan ahead. Some questions that, well, I even get on the farm side is, how do we get pre-approved for a loan or pre-qualified for a loan? How does that process work?

Matt Gray (18:03):That's a top five question also. It might be the number one question. There's many different ways to start the process to get pre-approved for a home loan. And I will say there's no two people that I will treat that process the same with. And I'm only saying that because some folks want to come in in-person, I want to be in front of you. So we cater to those people, of course. So we will do that, but there are some people that are so busy you may not ever get a chance to see them. A lot of folks more than ever, I just can't stress how this business has changed over the years. Emails and text and all the different electronic technology that we can utilize, I have a lot of people that I'll pre-approve via email, text, and our online offerings. Collecting information that way to simply review their information and give them a thumbs up.

Matt Gray (19:14):Hey, green light, go to town, call me back when you see something that you're interested in. And I think there may be even more of those folks today than the latter, the people that want to come in face to face. I think that's just because we live in a very busy world and folks like that touch and go, those things. And it's part of the reason why, I'm going to use the term quicken loans here, it's part of the reason why a structure that they have has been so successful for them. I think they have made it so easy for folks that live a busy lifestyle. I think that's why they get their fair share of business. So we can be that too. So that's why I want to put that out there.

Matt Gray (20:09):But the process itself is very easy. Need a quick loan application, need some basic financial information, past couple of years tax information, some W-2s and some pay stubs and some bank statements, things that are very easily obtained if you're halfway decent at record keeping at home. And it's not that difficult, we try to make it pretty easy up front. And sometimes to get somebody pre-approved, literally once I have all those pieces, it might only take me a couple of hours. If something's a little bit more comprehensive, as far as a financial situation for some folks, it might take a day or two to get the correct answers for people. But it's usually a pretty quick turnaround.

Phil Young (20:58):The question I get a lot from younger people is credit scores. Can you walk through how that comes into play? We call them CBIS or credit bureaus.

Matt Gray (21:09):The credit scores, that's a hot button, hot topic. I'll take phone calls every once in a while and that's, "What's my credit score have to be?" That's what you hear on the other end. Although it's way more than that, it is a big piece of the puzzle. How I describe the credit score piece to folks is, it's your foot in the door. There's a lot of other things, once you get your foot in the door, we're going to ask you to look at your situation. But most loan programs, including ours, all loan programs for that matter, will have a credit score criteria. And if you cannot meet that criteria, it is a very black and white yes or no answer. And so normally, for example, we've got 680 plus credit score criteria here. So at a very minimum, we want those folks to be 680 or higher.

Matt Gray (22:11):And for many reasons, it opens the door to different loan programs and things of that nature. There are different loan programs that will go down lower. Those are probably not going to be of the AgCredit portfolio type of loans. But some of the government programs that are specifically designed for first time home buyers will go down a little lower because they understand that young folks aren't that deep into their credit life with maybe a real, super strong credit score, because they're just limited in what they've been able to do at a young age. So like FHA loans and USDA loans and even VA loans will go down. They're a little more lenient on the credit score piece. But it is very, very important from an early stage, from the very beginning when you are establishing credit, keep that thing healthy, make sure your bills are paid. It is so critical for your financial success along the way. And it can be a very rough road if you get off on the wrong track early on in your credit life.

Phil Young (23:25):Or there's fraud and you didn't know about it.

Matt Gray (23:26):Just all sorts of... So just be aware more than anything else. Don't just take out credit to take out credit, be aware and make sure your credit life is healthy. Once you're ready to buy your first car or buy your first house, when you get to that point, it's going to make your life so much simpler.

Phil Young (23:51):I've had some younger borrowers where I've pulled their credit score and they don't have one, they just don't have a score. So I get questions where it's like, "Hey, how can I fix this?" And it's as simple as when you get a car it's like, well you can get a really small gas credit card. And that'll help just at least establish some sort of credit. And make sure you pay it off to establish that you have repayment. I've had some guys that have had really good success with that.

Matt Gray (24:21):I've used that myself. The gas card or the Walmart card, you're going to buy groceries at Walmart, you're going to buy gas at Walmart, you gotta start somewhere.

Phil Young (24:30):And usually it's a low limit. I think it's probably safe to say it's probably a good idea to have it on a low limit. Just since you're getting used to it, you don't want to abuse it. But that's a good, quick, easy way I think to build a credit score.

Matt Gray (24:43):And we could talk a lot about some tricks and stuff like that about getting credit established. Because there are some out there to help your son, your daughter, whomever, to get their credit scores going. So you mentioned younger folks that call in on occasion with no credit scores because they are so young or maybe they never had a need for credit. I get folks that call in and they're very responsible, have had a job for maybe years already, and they literally pay cash for everything. Maybe they were raised that way.

Phil Young (25:21):Just don't like debt.

Matt Gray (25:22):Or maybe they just don't like debt because they feel like it's the right way to do things. And it's not wrong. Does it make it a little more challenging for us? Sure it does. But to say that someone cannot get a loan simply because they don't have a credit score is untrue. So just know that it's worth a phone call to a loan officer if you're a young individual, maybe you went straight to the workforce out of high school and you just never had a need for a creditor or you just didn't want to go there because you wanted to pay cash and do things that way. Or you're right out of college, maybe mom, dad helped you. They did the student loan thing and maybe everything's in their names.

Matt Gray (26:09):But you're off to a fast start in your career and you just don't have a credit score. It's not to say you can't get a loan. So I always tell people, "No credit score is better than a bad credit score.” Because the damage that's been done by a bad credit score, sometimes it's really hard to correct. And sometimes it already paints a picture of an adverse credit history past. Where a young person with no credit score does not necessarily have a past that we're looking at like that in that respect. So it's always worth a call to your loan officer to see, like I said, where you're at, what your status is today. And if you're not quite there, we'll help you get to that next step with some advice.

Phil Young (27:00):Nice. In today's market, obviously existing houses are moving quite a bit, and then we also have home construction. Can you share a little bit about home construction and maybe, I know lot loans are big right now too, just buying a home lot for future construction, what does that process look like?

Matt Gray (27:17):Absolutely. I'll start there with the lot loans just because a lot of times we have an A and B process here with our lot loan programs. Which we do a lot of as well as our construction loan program. Same thing there, we do a lot of. So we do a lot of loan financing, a lot of construction financing. And a typical situation would be this. Let's say you're someone, maybe you already have a home, you're already paying on a mortgage loan, maybe it was a starter home. And I'm just using these examples because this is what we see.

Phil Young (27:56):Sure.

Matt Gray (27:57):... most frequently I'd say. The dream was always to maybe get married and you're starting a family. The dream was always to build a house together, build a family together. And you see a few acres or who knows, maybe you're an avid hunter and you see 10 acres and it's got five acres of woods in the back. And that's just great, you just love that. We can do a lot loan on that and make a loan for you to acquire that property. We offer nice fixed rates out to 10 years, give you a nice healthy 10 years because for some people, it just takes a lot of planning to know what they want to build, when they want to build. And it gives you time to get your finances in order. Because the next step being a construction loan, it's a different animal. And it's a tough hill to climb if you don't have some equity and maybe some cash setback and things like that.

Matt Gray (28:57):So that's a perfect example of someone that we might get for a lot loan. We do not have a limit on acreage here. We're rural lenders here at AgCredit, so that's our niche. So don't mind the number of acres. We do want it to be out in a rural area typically, outside the city limits of a larger area. I'll use Bowling Green for an example. The population within the city limits of Bowling Green is just a little too high. We want it to be out in more of a rural setting. And call in if you're not sure what a rural setting... A lot of places are rural that otherwise folks wouldn't call rural in some cases.

Matt Gray (29:41):But we can finance properties of any size. And then later on down the road, the idea is to turn that into a construction loan for folks. All the dreams and everything that you've been planning over the last how many years, we can wrap it all together and consolidate the lot loan at that time into this new construction loan. So I guess your imagination and what that's going to bring you in terms of what you want to build in the future and where you see your family living, we're all about that process. From the lot loan to the construction loan and walking you through that, we love those situations. We build lifelong relationships with our customers here. So that's become a real, real staple here, the lot loan program starts it all off for us.

Phil Young (30:36):Nice.

Libby Wixtead (30:37):So, Matt, we would like to hear just a general overview of what the process would look like for a loan. Because sometimes it seems like it takes a little while. Even on our farm side, if we're doing a real estate loan versus a home loan, what that process looks like. And then I will also throw out there too that as ag loan officers, if we have a farmer that comes in, the ag loan officer and the mortgage loan originator, we make a great team and work together in the whole process. So that's just something to throw out there, that we do work together as a team. Matt's a part of the teams of the branches that he works with just as much as Phil and I mortgage loan originator works with our office. But again, can you just give us just a general overview and a timeline of what the process looks like for just a general rural home loan?

Matt Gray (31:34):Sure. Well, obviously the first meeting or discussion kicks things off there. And, like you said, in the cases where it might be an existing farm customer specifically, I've got a few guys here in my Bowling Green branch office that I work real well with. If they've got somebody in their office, they're just going to come knock on my door and say, "Hey, come down here for a minute." And that's how we do things here, that's how we do things in Napoleon with Kirk over there. So it's a seamless process here in terms of an existing customer maybe wanting to bring in a residential loan here, we're going to make that a seamless process. You're still going to work if you're an existing customer, you still going to work with your ag account officer, for sure. Where we come into play here is we're going to take care of all those residential processes that don't typically need to occur on a farm loan situation. You got consumer stuff going on and they're just regulated differently. So it's different in that way.

Matt Gray (32:45):Now, if it's some folks that are calling in for the first time, maybe they're brand new to AgCredit, first steps, like I said, going to be a loan application, whether that's taken in person, over the phone, or filled out online. I would say to take a loan application, it's maybe a 10 minute process, that in and of itself. And then gathering up the necessary information. However quickly you can make that happen the better because there's two steps that sometimes get lost here. And folks we don't use the term a whole lot in the business because we like to pre-approve people, but there's a term called prequalification that actually comes before the pre-approval and a prequalification is simply a loan application and a credit report, that's all it is.

Matt Gray (33:39):So prequalification, I guess, is a more loosely based approval if you want to say. We like to gather the financial information because what our job is, is to prove everything that's collected on the loan application. Our job as a loan originator or a loan officer is to prove them right with supporting financial information. Is everything supported on the financial information they give us that's on the loan application? And it's our job to do that and support that documentation onto the next step. So that's when we grant the pre-approval, is after we do that. In my opinion, that's where you want to be if you're ready to, for example, make a purchase on a house.

Matt Gray (34:28):When you get in the negotiation phase and you're talking about maybe offering a little bit more on a counter offer situation, you want to know. You just want to know that you're on solid footing, we want to know that you're on solid footing. So the most important thing and the quicker the loan application and the documentation stuff can happen up front, the faster we can get you your solid answer that you're really looking for. How confident am I to take my offer to this REALTOR®? Am I on really solid footing here? Because that's what... We want you to feel confident when you're going over there. We don't want you to feel like, oh yeah, you talked to this loan officer and he just him-hawed...

Phil Young (35:14):Wishy-washy.

Matt Gray (35:14):Yeah, wishy-washy, We don't want to be that way. So we like to be thorough and that's for your advantage. From that point, once you're pre-approved and we have a purchase contract if it's a purchase situation, really once we have a purchase contract, I tell people it's live. Now you're live, now the process begins, which includes getting some signatures on some preliminary loan estimates to show you how much. Whether that's a down payment that's going to be needed, closing costs, things of that nature.

Matt Gray (35:51):Everything that you're going to see come closing time, what that will look like upfront as a loan estimate. That way going into it, you have a pretty doggone good idea what that's going to look like. So you're not running into any surprises later on down the road. Once we've got that purchase contract, I normally tell people, it's usually a 30 day process. Can be as many as 45 days depending on the loan program. Sometimes government loans take a little bit longer because you have extra steps in there. But 30 to 45 days, I'm going to say, is a pretty average window for the mortgage loan process from start to finish and wrapping it up at the closing table.

Phil Young (36:38):And a lot of that has to do with appraisals, title work, that kind of thing.

Matt Gray (36:42):So that's one thing. Most people, and some people may not realize that, but not only do we have to do our job, but we're relying on other folks in the loop there to do their job. And I'll say this just because I'm the loan officer here, normally my job's done. We get our work done, you guys get your job done super fast. And we're sitting, waiting for some different pieces of information to come in so we can just tie it all together, it's how it's working. So we're waiting on appraisals to come back and a title search on the property to make sure you're not worried about any liens on the property that you might be purchasing. And then we've got to coordinate closings and stuff like that with buyers and sellers and attorneys and things of that nature.

Matt Gray (37:31):But with saying all that, it sounds like a lot of stuff going on, we'll take care of it. So all the folks really have to do, once they get us a purchase contract, sit back, take a deep breath, let us handle it, and we'll make sure every step gets covered. That way, there's no worrying about it. We're going to keep everybody informed along the way because that's the first thing. One day, two days feels like two weeks to someone who's in that situation trying to buy a house, doesn't it? You guys get those situations too. So a little bit of time's going to pass because there's just a lot of things that have to happen before we can tie it all up. Doesn't mean anything's going wrong, it just means we're being as thorough as we can so you end up in a good situation after you close. So that's in a nutshell. It’s a little bit longer a process maybe than some other types of loans. But trust me, it's worth it. Home ownership is worth it.

Libby Wixtead (38:45):Do we require any inspections or is that something that is up to the home buyer to do on their own in this process as well?

Matt Gray (38:56):That's a good question. So I get this a lot from folks. Some folks will ask me that question and they're not sure what the difference is between an inspection and an appraisal. They're thinking the two are the same. Well, there's two different things that normally happen there. Number one, a home inspection is something that you can always do. Now, that's going to be on your own behalf. If you seek out someone, a home inspection is going to be something where you're paying an individual that's licensed to come out there and they're checking specific things. They're checking the electrical box, making sure things are up to code, they're checking the duct work, they're checking the furnace and doing some tests on the furnace. And they're doing very specific things. They're basically going to give you a bullet pointed report.

Matt Gray (39:49):So after you purchase your house you know if there are deficiencies or the things that maybe just are going to need maintenance in another year or five years. So they're just going to give you a comprehensive report. And I never try to tell people, "Hey, you don't need a home inspection." Because I think it's a good thing. But then we're going to get an appraisal done. An appraisal is more or less as the lender here, we want to know what the current market value is of that property. So therein lies the difference. We're more interested in how much this property can be valued at in the open market so we know we're lending you the proper amount. And then the home inspection normally is going to come before that. Normally if someone's going to get a home inspection, they'll do that before we even order an appraisal.

Matt Gray (40:40):And after the home inspection comes back and we get a thumbs up from the buyer that says, "Hey, my home inspection came back okay, we're good to roll." Then we'll go ahead and get the appraisal done. So two different things, both are very important in my opinion. Now, if you're pretty savvy and you've got a dad or a grandpa that knows their way around a house, do you absolutely need a home inspection? No, you don't. Or if you're a pretty handy individual and you feel like you know what you're looking at and you're pretty confident... Home inspectors come in and I feel they are very important, maybe sometimes on older homes that maybe have a foundation that’s suspect. Because sometimes we can't see those as just a homeowner, not an everyday contractor type of guy or gal. So those are the situations where I feel like you'd really want to know, structurally, is this place going to fall down in two years and I'm just sitting here left with a money pit?

Phil Young (41:44):There's a reason they're selling it, right?

Matt Gray (41:45):Yeah, that's the first thing you want to know, why are these guys selling this place? So just you got to dot your Is and cross your Ts. So do whatever you feel is going to give you all the information you need to make a sound decision. Because no matter what the purchase price is, it's a lot of money. So you just have to be mindful of those things.

Libby Wixtead (42:15):I was going to say, going off of a purchase price, is it more beneficial for the customer or the potential customer to come in with a number in mind of what they want to spend rather than saying, "Just tell me what my limit is?" What's more beneficial?

Matt Gray (42:38):I feel like as a loan officer, let's put it this way, we're going to look at both of those and address both of those questions typically. But normally, I would really prefer if someone is going to fill out a loan application or come in, one of the first questions I ask them is, do you have a property in mind? And if so, what price range do you... What properties are attracting you? I want to know what bubble we're in and what price range we're working in. Because I want to apply as real as possible the situation we might end up in. Now, if I'm sitting with a customer and they say, "Well, I'm looking at a price of right around the $200,000 mark. That's what we've been looking at in that range." So we're going to plug those numbers in first. And we are looking at things like debt to income ratios and loan to values and do we have down payment? Are we going to do a down payment? All those different things.

Matt Gray (43:44):But within that same review and conversation, inevitably it comes up, "Well, if we find a house that's $250,000 instead of this $200,000 are we going to be okay? So a lot of times, the discussion will lead to that, a higher figure. So we're always going to plug in a number in terms of limits that the bank's going to set as far as ratios go. But I always tell people, "We can go up to this. But it's up to you ultimately to decide where you want to be with your budget. Because we can't decide that for you, your lifestyle is going to dictate what you feel like you can afford." And that's with any bank. I'll just go out on a limb and say I'll speak for any loan officer if they're not telling folks that is, you would be surprised how much the bank would be willing to lend you in some cases is certainly not always what you should borrow. If that makes sense.

Libby Wixtead (44:51):Yes.

Matt Gray (44:51):You know what I mean? But it is helpful for them to know they have a ceiling. It's just maybe the steak ends up being a pork chop that you're having for supper. Or maybe you just don't want to be house poor. We've all heard that term, you don't want to be house poor.

Phil Young (45:08):White bread and crackers and water.

Matt Gray (45:09):Yeah, you don't want to do this.

Phil Young (45:11):For meals and to live in a nice house.

Matt Gray (45:13):So I like to start with a number that's reasonable, maybe something that is a real life example of maybe some things that they've been looking at, that's a good way to start it.

Phil Young (45:24):All right, Matt. So I have one more question. We talked about buying a house, constructing a house, buying a lot, but a lot of people call in and they want to improve the house they have, whether that's fix up the bathroom, fix up the kitchen, whatever it is. What products do we have for that? And is that doable?

Matt Gray (45:41):Yeah, absolutely. That's a big part of what we do here. I feel like even more so in the last couple of years, a lot of folks may have ventured in to look to build a home and they decided, "Well, that price tag isn't for us. We're going to stay where we're at and we're just going to make our home better." So you get a lot of that. Or we get folks that want to put up a pole building. Consumer pole buildings right now are just huge. We're doing a lot of loans to help finance pole buildings. And we've got a couple different ways we can put these packages together. I'll just use maybe three examples here. The first example would be somebody calling in and they want to add a 1,000 square foot addition to their home. Maybe that includes a bathroom and a bedroom, it could be all different situations, of course.

Matt Gray (46:34):But what we can do here, and I think it sets us apart a little bit differently in this arena, the home improvement arena, is that we can collect your plans for your improvements as well as projected costs. And we can have those properties appraised as if that new addition is already part of that structure. And what that gives us in terms of an appraisal is an estimated value with your improvements considered already in that figure. What that allows us to do sometimes is lend a little bit more for you and go up a little bit higher in terms of loan to value. And that's how a lot of times we'll put that financing together, to put out that extra $100,000 or whatever it is, to put that addition on. So it's the power of money, it's the power of numbers.

Matt Gray (47:31):So we'll get it appraised as such and we'll put it all into a new mortgage loan for you, put the additional money into an escrow account so we can pay your builder along the way as they're building your project. Same goes for pole barns. A lot of times we can do a first mortgage pole barn situation the same way. Give us your plans, give us your estimates, and we're going to build that value into that appraisal. And that allows us to do that financing package for you. So same thing there. If we don't want to touch a first mortgage, somebody doesn't want to refinance everything and it's just maybe you need $50,000 to build a pole building or something of that nature, we can offer shorter term, fixed rate, standalone loan situations. That's a good program, and it's a newer program here.

Matt Gray (48:24):Especially now with rates on the rise, a lot of folks are sitting pretty on their first mortgage rates. We've had a lot of refinance activity the last couple of years and a lot of low rates because of that. So we can look at potentially making up to a 10 year fixed rate loan to finance a pole building, something to that degree. So we've got several different options there. Enough options to where we could basically put them all on the table and say, "Hey, here's what we can do. And more than likely, one of them is going to rise to the surface that's going to be the best fit for what your situation is." But doing a lot of pole building financing, I would say we're becoming very, very well known for pole building financing here. So pretty neat programs to offer there.

Libby Wixtead (49:20):Yeah, absolutely. My husband and I are looking to put up a pole building in the near future. So I'll keep that in mind.

Matt Gray (49:25):Hey, you're in the right place.

Libby Wixtead (49:29):Well, we just want to wrap things up now. Thank you, Matt, for joining us today. We really appreciate you being on the podcast with us. And for our podcast listeners, if you guys know anybody that is looking to purchase a home or a lot or to do a construction or even home improvements, have them call one of the local branches and they can get you guys connected with the mortgage loan originator in that area. Also feel free to pass along this podcast to anybody so they can become a little bit more informed with home loans. Also, we ask you guys to write a review and rate us on the platform that you guys are listening to our podcast on. That will help others find us to listen to our podcast. So thanks for listening. And we'll be back in a couple of weeks with another AgCredit Said It podcast episode.

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