Ep. 108 Getting Financially Ready to Buy a Home

This episode of AgCredit Said It focuses on going “beyond the balance sheet” of farm finance to discuss how to get financially ready to buy a home and explore unique home lending options available through Ag Credit, hosted by Libby Wixted with guest Mandy Stacy, Director of Consumer Lending at AgCredit.

Transcription

Speaker 1 (00:08):Welcome to AgCredit Said it, your go-to podcast for insights on farm finance and maximizing your return on investment. Join us as we talk to industry leaders, financial experts, and area farmers, bringing you skillful advice and strategies to grow your farm's financial future. AgCredit Said It, where Farm Finance goes beyond the balance sheet.

Libby Wixtead (00:39):Welcome back to AgCredit Said It, where we take you beyond the balance sheet of farm finance. I'm your host, Libby Wixted, and today we're talking about getting financially ready to buy a home plus some unique lending options through iCredit. We're joined by Mandy Stacy, Director of Consumer Lending at AgCredit. Welcome, Mandy.

Mandy Stacy (01:01):Thanks, Libby. I'm excited to be here.

Libby Wixtead (01:04):We are so happy to have you here today. Can you share a quick overview of your role and what you enjoy most about helping our borrowers?

Mandy Stacy (01:12):Certainly. I oversee all aspects of our residential lending department from policy to credit approvals. What I enjoy most is creating products and processes that truly serve our communities with a constant focus on putting our borrowers in the best possible position. We take a relationship-based approach to lending rather than a transactional one and that's been the most rewarding part of my 20 years here. I started by working directly with borrowers and now I get to support and coach our lenders to really dig into each individual situation so we can guide people towards what genuinely works best for them. At the end of the day, knowing that we're putting folks into homes in a strong financial position, that's really what I love most.

Libby Wixtead (02:02):You guys do have a rewarding job in really making people's dreams come true when it does come to home ownership. So let's talk about how to financially prepare for a loan. What are some things that someone should do before they start house hunting?

Mandy Stacy (02:21):Sure. The very first step is to connect with that credit and talk with one of our residential lending experts. That is where we're a little different. We like to invest time upfront with our potential applicants. We'll evaluate your full financial picture and help you determine a comfortable price range based on your income, debt, and savings, while also identifying the best loan options for you. And we make it easy. We can meet in person or virtually whatever fits best in your schedule.

Libby Wixtead (02:54):When somebody comes in, what are some things that you guys look at in particular to their finances?

Mandy Stacy (03:03):Yes. On a home loan approval, it really comes down to credit score and then your repayment ratios. So we're going to take a look at what your principal and interest tax and insurance obligation is going to be with that new home in relation to your income. And then we're also going to look at that PITI payment and all of your installment debts in relation to your income. And we'll get into that a little bit more.

Libby Wixtead (03:30):So credit score, everybody talks about credit score and you see the commercials on TV of, oh, you can get your free credit score and blah, blah, blah and all of this. What does that actually mean? And what can people do if they have a low credit score or have no credit at all?

Mandy Stacy (03:48):So your credit score plays an important role in qualifying for the best rates and the lowest costs. Typically, we're looking for a minimum around 680 with more flexibility as you get above 750. One of the biggest factors we see impacting scores is credit card utilization. It makes up about 30% of your score. Ideally, you want to stay below 30% and under 10% is even better. So a simple strategy is to actively use one card, one open revolving line of credit or credit card while keeping the others at zero and try to pay your balance before the statement closing date, not just the due date so a lower balance is reported. I'll admit I'm a bit of a credit geek and tested this myself. I used to pay my credit card in full on the due date of every month, but I wanted to check this out myself.

(04:48):So I started paying it about a week earlier before the statement closed and I saw a noticeable jump in my score almost to perfect. It's a small change that can make a big impact. And of course, also just paying everything on schedule and on time makes a big difference as well. Now with all that said, another difference here at AgCredit is that we do want to work with borrowers who don't have a credit score. So as long as there is no score because there is no negative credit history and you simply haven't secured any debts in your name yet, we have no issue with that and we don't charge you more in those cases. A lot of lenders do require that you have a score, but here we welcome applications without a credit history.

Libby Wixtead (05:40):So how long of your credit history will stay on a report? Is it like you start in 1999 to 2026 and all your history is there for that whole entire time or how many years is it typically?

Mandy Stacy (05:55):It really depends on the type of debt that it is if it's a revolving line, if it's a mortgage, if it's an auto installment. So don't have a perfect answer to that, but a lot of accounts, once you've paid them in full, they will stay out there for seven years. So that's why you want to make sure that you're making all your payments on time so that that negative history doesn't continue to impact you.

Libby Wixtead (06:21):Yeah, absolutely. So what do you see that are common mistakes that people make when it comes to debt?

Mandy Stacy (06:30):One of the most common debt mistakes we see is taking on high auto loan payments. Those obligations can quickly eat into your monthly cash flow and as a result, significantly reduce the amount you're able to comfortably allocate towards a mortgage.

Libby Wixtead (06:48):When people have, let's say they have just graduated college and they haven't been in their job very long and they're just getting started out, do you have any advice for somebody so they don't make those mistakes at that, how they can set themselves up for success buying house building homes along?

Mandy Stacy (07:15):Come see us or call us as early as possible is the best advice I can give someone. Even if you're coming out of college and you're not sure where you're going to land that job or where you're going to settle and maybe you're looking at five years down the road, go ahead and talk to one of our experts. That's what we're here for and that's what we're really good at because we can look at, okay, here's where you are from a debt standpoint. Now what is going to make the most sense for you? Is it being really aggressive in paying these debts down or is it paying those regularly scheduled amounts and putting money away in a savings so that you have a sufficient down payment? And every scenario is a little different based on what you have in terms of debt and potential income.

Libby Wixtead (08:09):So I think this comes back to where you started off the conversation today of being the relationship lender is we want to have that relationship with our borrower and really have that consulting piece of it that goes along with trying to set them up for success. So that's awesome. So I guess going along those lines of once they come in and talk to you and you guys can have that conversation, how much should somebody have saved for a down payment or closing costs or any hidden costs that could come along with buying a house or building one?

Mandy Stacy (08:47):Well, 20% down is the traditional benchmark to avoid private mortgage insurance also referred to as PMI. One of the biggest advantages to working with AgCredit is that we offer a conventional loan with no PMI with 15% down instead of that 20% standard. And avoiding PMI is important since it adds a significant monthly cost without helping you build any equity in your house. It's essentially doing nothing for you. It is not paying that principal balance down at all. And then for first time home buyers, which is defined Teradata credit by anyone that has not owned a home in the most recent three years, we do offer a product with as little as 3% down and no PMI, which gives buyers more flexibility without putting you into a risky position with that monthly PMI obligation.

Libby Wixtead (09:46):Wow. That's an incredible product.

Mandy Stacy (09:49):It is. It is. And then one more thing to note, Libby, on how much you want to have saved for the down payment. I think it's also important to note that beyond the down payment, it is really, really important to plan for the closing costs and to have some cushion for unexpected home expenses as you get into that home.

Libby Wixtead (10:13):Yeah, absolutely. No, I don't think any house really comes perfect when you are looking to purchase a house. There's always something that you want to change or inspections come through and there might be something that pops up. And so really thinking that through and having that down payment saved up and having some extra funds for those repairs or anything that you really, truly want to change I think is a really important piece. So let's talk about, which we kind of touched on a little bit of how can buyers figure out what they can truly afford for purchase?

Mandy Stacy (10:54):So the easiest way is to connect with us early and with just your income and debt information, we can quickly give you a realistic approval amount that aligns with your budget. Early on, we can gather that information verbally and then for the final approval, we'll need items like tax returns and W-2s for two years, pay stubs for 30 days, and then recent asset statements.

Libby Wixtead (11:22):So very common financial statements that you would need if you're for any other loan that you're really looking at. And so what happens then when you guys receive all of those items?

Mandy Stacy (11:35):Yeah, we're going to take a look at your income in relation to the debt as well as your credit score and then determine, okay, what fits best in your monthly budget? What is going to make the most sense for you and still leave you room to live and not be tied to only that mortgage payment?

Libby Wixtead (11:57):So can you do pre-approvals or is it better to sign a purchase agreement and then come to you guys What is the best practice or process that you typically see on the home side?

Mandy Stacy (12:11):Yeah. So typically most folks are coming to us for a pre-qualification before they even start that house hunting process and most realtors today have a true appreciation for when you come to them already pre-qualified. So that really is best case scenario.

Libby Wixtead (12:31):Do you see that most realtors will require that when looking at a home or like the seller's realtor will require that before they'll even show you a home?

Mandy Stacy (12:43):Yes. So it does differ a bit from one market area to the next, but here in Northwest Ohio, what we find is it is very likely that it is going to be required to have that pre-qualification letter.

Libby Wixtead (13:01):Okay. I've seen that with some of my farmers here a little more recently, so that's why I have to ask that as a personal question too, to find out. Yes. Okay. So why don't we put a little scenario together? So if someone wants to buy in a year, what should they start doing right now?

Mandy Stacy (13:23):Yes, certainly. If you're planning to buy in a year, now is the time to focus on your credit and savings. Work on paying down debt, managing credit card balances, and making all payments on time. At the same time, start building your down payment and setting aside funds for future home expenses. Those steps can all make a big difference when you're ready to move forward.

Libby Wixtead (13:48):And even thinking about for your home and making repairs and like that too, do you find that some people think they forget about furnishing the home as well, thinking about things that have to go in the house as well?

Mandy Stacy (14:03):Yes, especially on home constructions. That can be a significant cost that easily gets missed. So that is why it is so important to leave some cushion in your liquid accounts so that you have access to resources for those extras.

Libby Wixtead (14:22):That just had crossed my mind. We're building a barn right now ourselves and we're thinking of all the things that we're going to put in it and it's like, oh, well, that just added a few more costs to it. So for personal experience, it kind of came up. Let's talk about AgCredit's home loan options. I know you're very, very excited to share these options. What are some of the unique home loans that we have to offer?

Mandy Stacy (14:48):Yeah. So here at AgCredit, we offer a wide range of lending options, including VA loans on the secondary market. And then my favorite are conventional loans that we service in- house here at Ag Credit and that's where we really shine. So that's what I want to focus on today. So one of our newest offerings is our first time home buyer program, which I mentioned earlier and it is a conventional loan with a traditional appraisal report requiring as little as 3% down with no PMI. I hope you caught that, Libby. There's no PMI with just 3% down. And then we also offer a fixed rate construction loan with an on-time closing to help reduce cost, a lot loan with 15% down for home site purchases. And then we also have flexible refinance options including using future property value for home improvement projects.

Libby Wixtead (15:47):Yes. Did catch the NMI, which is exciting, first time home buyer. I'll reiterate that again for us. Thank you. My husband and I personally used AgCredit's Home Loan products here and they have been wonderful for us and the improvements that we've wanted to make on our house. And so can you also share how our products differ from a traditional bank? We've done what I call it our barn loan with our mortgage, which I think is an awesome, awesome product to have.

Mandy Stacy (16:23):So what sets us apart is that we keep and service the majority of our loans in- house, about 99% of our originations. So that means borrowers receive local personalized service throughout the life of their loan. You're always going to walk in our door and we're going to take care of you right here locally. You're going to walk in and likely see a familiar face from your community. So one of the biggest advantages of us holding your loan is our rate modification option. So instead of doing a full refinance, we can lower your rate as early as 90 days after closing for just a $300 fee if the market changes. And here's the best part, Libby. We even monitor rates and we'll proactively reach out when the opportunities arise, which is something our customers really, really appreciate. Likely, if you know a current credit borrower, you have probably heard mention of this as many of our customers do spread the word as it is just too good not to share

Libby Wixtead (17:31):Absolutely. And I think that comes back again to that relationship piece and you're the loan originators, the farm loan officers. We're all in this community and we're all here to help and build that relationship and no better phone call and be able to call a customer with that opportunity for a note modification. Could you share what the most popular loan types are right now?

Mandy Stacy (17:59):Yes. So one of our hottest products right now is our fixed rate improvement loan. So many homeowners today have locked in very low rates from a few years ago and this option that we have allows them to tap into their home equity without refinancing their entire mortgage. So it's essentially a fixed rate second mortgage with minimal closing costs and terms up to 10 years. So you can keep your existing low rate while financing improvements. We're also seeing strong demand for financing barndominiums, especially here in Northwest Ohio and we have a product specific to barndos.

Libby Wixtead (18:42):Yes. There are many, many, many of those that we see driving around our territory going up and my husband's still trying to talk me into one. I don't know. We'll see one day maybe. Can you finance a home with land and how does that work?

Mandy Stacy (19:00):Yes, certainly. This is actually one of our niche products as we have no acreage limits and offer conventional financing for homes on large parcels of land, which many traditional lenders cannot accommodate. But if you call us, we say no problem.

Libby Wixtead (19:20):I mean, all of our products that we've talked about are so unique to our customers and our territory. And guys, I can't say enough of how much we can offer to you. What flexibility do borrowers have that they may not realize? Yeah.

Mandy Stacy (19:35):So borrowers are often surprised when they come to us by the level of flexibility that we offer, whether that's a lower down payment option without PMI, rate modifications or financing for unique property types. Because we keep everything local from approvals to servicing, we're able to take a more personalized approach and tailor solutions to each borrower.

Libby Wixtead (20:02):Again, that's a relationship and like you said, that local piece and we just have so much to offer for our customers on the home loan side that I don't think a lot of people realize through our products. And on the farm side, that's our job as a farm loan officers is to spread that word because there's so many of our borrowers whose kids are looking to build houses or purchase them and a lot of them are like, "Oh, you guys do home loans." It's like, yeah, we have these great products. If somebody is ready to start and what is their very first step that they should do with AgCredit?

Mandy Stacy (20:41):The first step is simple. Just reach out to us and start the conversation from there we'll walk you through your options, evaluate your financial picture and help you move forward with confidence.

Libby Wixtead (20:55):And every office is covered by a mortgage loan originator who covers the home loans, correct?

Mandy Stacy (21:02):You got it. We have an expert covering each of our counties and they're all very friendly and again, many times a familiar face in your community. So it is not an intimidating phone call and we will step you through each of the phases.

Libby Wixtead (21:22):And if you have a farm borrower who like I just mentioned a little bit ago, let's say they are looking to build a house or buy a home somewhere, how does that work, a farm customer and wanting to go into the consumer loans?

Mandy Stacy (21:39):We're going to approach that very similar with working with our residential expert. However, we're going to use a team approach so that the account officer that that farmer is used to working with, that individual will handle the credit piece and then the residential expert will handle determining what product is best suited and really dialing in on what makes the most sense on that residential deal.

Libby Wixtead (22:07):All right. Well, that's awesome. We are all a team and we all work together and we are very customer forward and focused. And Mandy, we thank you for joining us today. We appreciate you sharing your knowledge and insight on the consumer lending side. Thank you to our listeners for tuning into another episode of AgCredit Said It.

Speaker 1 (22:35):Thank you for listening to AgCredit Said It. Be sure to subscribe in your favorite podcast app or join us through our website at agcredit.net so you never miss an episode.