When should you pull your credit? This question is one of the many questions first-time buyers ask David Sidoni. David explains that if you want to buy a home someday, you need to get full loan approval with a credit poll today. It’s far better to do it now than to do it 30 days before you buy a home. The key is to prepare. Put the planning horse so far in front of the cart that the cart is back in the next county. Join the conversation to discover more answers to urgent questions from panicked home buyers. Tune in!
72 – Answering First-Time Buyer Listener Questions On Credit Pulls, Timing The Market, Part-Time Realtors, And More
First Time Home Buyer Listener Q&A
In this show, I’m going to be sharing some questions that I’ve been getting from readers. There are no stupid questions because, frankly, it’s stupid how little correct information is out there for you. These readers are also called stans, that’s stalker fans, at least that’s what my eleven-year-old told me. They reached out to me and I know that many of you out there may be pondering exactly the same questions. Let’s answer it for everyone. Let’s do this.
This is a very special stan-reader question episode. I said it before, there are no dumb questions when it comes to buying your first home. It is mad confusing and I’m here to edumicate you, to empower you, to drop truth bombs and help you learn the insider secrets. Some of these questions come from brand new readers that read half an episode and then decided to reach out to me and ask me first.
Impatient, sure but I also see them as proactive. Now here’s a little hint for all of my hyper rapid or ADHD people out there, hit subscribe, and you’re going to get a new episode every week. There are lots of them. My guess is the answer’s going to be in there somewhere. Go back, look at the back catalog and check it out.
When you’re out on your way to work in the car, train or whatever, did I mention that you need to be going to work if you’re going to buy a home? Yes, you need a job. If you’re working out or walking the dog, iguana or whatever you’re doing when your ear pods are in, you can scroll through all the topics. There are 70-some episodes out there and there are titles for each one that maybe something looks familiar, like, “Maybe these questions sound familiar.”
Pick the areas in which you could use some more of edumacation. This is the best way that the show works for you and I’m happy to help. I’ve spilled my guts here on this show for your benefit. Back in 2019, my goals changed. I decided I no longer wanted to work in real estate to make money. I hated the way it was going. I now do this to help people find their path to owning.
It’s to help you guys shave years off the time that you rent while the ultimate goal is you’re eventually going to buy anyway. I got to tell you, this has been redonkulous of an ounce of fun for me. I don’t use that word lightly. Yeah, I do. Talking to you guys directly is fantastic. Many of you people out there are grounded, intelligent folks, trying to find anyone to help explain in some layman’s terms and get you the best strategy to figure out how are you going to do this for you and your family? How are you going to step up for your future?
I’m not going to give you some empty general rules. I’m going to give you some guidelines and some things that might work for you and then I’m going to give you all the gory details of it. I’m sure many of you have fallen asleep to some of my episodes where I go through real estate, data, facts, and numbers. Because some of this can get confusing, I have communication on a daily. It happens to me from DMs, texts, calls, emails, Zoom consultations and these meaningful exchanges with you readers out there really inspire me.
I figure that I lay out some of the real questions that I’m getting from real readers. I’m hoping and I’m guessing, that many of you are going to think, “That’s exactly what I was wondering about.” It’s so rad. Let’s do it. Our topics were a panic reader that needed help. I figure that’d be a fun place to start. I’m talking sheer hysteria. It was awesome.
We’re also going to talk about timing the market or waiting out this crazy market. We’ll talk about another topic on that. It’s a little deeper waiting until your lease is up. We’re going to talk about using different realtors. Some people ask me questions about part-time realtors. A big question I’ve been getting is out pulling your credit. When you get your credit pulled, that counts as a credit inquiry. We’re going to talk about hard polls.
Don’t giggle, you little twelve-year-old. It’s a credit term, hard polls are when you get points taken off your credit, and people want to know, “When should I do it?” Before I get into the actual topics, let me give you a pre-topic because this is the question that everybody has asked me all day long, forever and ever since I started in real estate. I know it’s a topic that everybody wants to know.
How’s The Market Right Now?
It’s such a talked-about topic. It doesn’t even need to be on the topic list. Can I say topic one more time? The question how’s the market right now? The answer is simple. This s*** is bananas. You don’t believe me, go back one episode to the urgent market update that I posted that I had to sit down and record on January 13th or 14th, 2022 or something like that.
Things got crazy. In a few days, things got nuts and here’s what’s even more bananas. The stuff I’m going to tell you right now is what’s happened the following week after I recorded that episode. Still, in the first few weeks of January 2022, I heard from over a dozen different unicorns from all over the country because I’m always checking in to see how the readers are doing from Hawaii to Florida to Washington, to Maine in New York. Their buyers are standing in line to see homes in many of these prepared buyers because they are reading the blog post and they’ve got a great unicorn team working with them.
They’ve been outbid on 3, 4, 5, sometimes as many as 8 to 10 different offers have been outbid on 8 to 10 different homes and the homes are selling in the first weekend on the market. You ask me the question, how’s the market? It’s bananas and that’s what’s happened. As for me, I’m doing a show, but I’m also still out there every weekend. It’s like what 9:00 at night, I’m still at the office on a weekday and I still go out on weekends. I’m living my best life.
What I’m finding out there is that I’ve got my buyers fully prepared. I do a show. I better know what I’m doing. I’m trying to get our offers to the top of the pile from my guys and my people, sorry. We’re talking seven offers in the past week in January 2022. Where’s the market going? All of these offers came in the first day or two on the homes, written by me with prepared buyers and a unicorn lender. None of them were accepted, zero.
Two of them gave us a counter-offer. They may as well have sent us a piece of paper with a giant middle finger on it. I mean they were asking for the moon, all the things in favor of the seller. They are basically asking the buyer to give up all their rights, to pay for everything, to give a super high price way over whatever the appraisal might be. If it does go way over that appraisal and the appraisal comes in low, the buyer has to pay the gap. By the way, you only have two days to do an inspection and whatever you find too bad, we’re not fixing squat no matter what you find.
Three of them gave me a call or an email with no explanation. Just that our offers are anywhere from $10,000 to $20,000 to $30,000 over price on those three offers, they’re not be even being countered. One of my buyers offered $751,000 on a home. If you’re somebody else in the country, relax, breathe. That’s what first-time buyers cost out here.
Someone offered $751,000 and that’s in some of my old shows why I did that. The home was listed at $725,000. We were told that there were 30 offers on that home on the first weekend and our offer, $26,000 over the list price, didn’t even make the top 10 of the 30 offers. The townhomes in this tract are all exactly the same and they usually sell for around $700,000 at the end of 2021. The highest sale ever was a sale in November 2021 at $730,000.
This one was offered at $725,000. We offered $751,000 for a model match to another townhome in the complex, $26,000 over and we didn’t make the top ten for a home. Our offer was in the first couple of days that the home was on the market. I’ve got one more story. Let me read you the email I got. “Thank you for the offer on this property. I had 600 people come through the home over the weekend and had 200 calls and texts. We received 27 offers, with the lowest offer at the asking price.”
Our offer was $11,500 over the list price, the email continues and many great offers of the 27 we had were substantially over the asking price with very aggressive terms. The sellers have chosen to only counter the top three and we didn’t make the cut. Gang, this is the market. I can’t say it enough. Let the facts and the stats be your guide in 2022.
Don’t let anyone give you advice or tell you what to do in buying a home in 2022 unless they’ve bought a home in the last six months because no one truly understands what it takes to buy a home nowadays. I don’t care how many homes they bought in the past, how much money they have or how financially smart they are. They’ve never bought in this market because this market has only happened when it’s happening and that is right now. It happened like this in 2013, but not nearly as bad.
With all this craziness going on, I got one more thing before I get to the rest of the topics. I’m getting people to ask me about this, so I’m going to cover this in one swoop and it’s the internet stuff. People are asking about these things called iBuyer or other internet tools out there to help you buy a home without a realtor representing you because they think that the way things are going right now, the homes can sell like everything else. It’s online from the seller to the buyer and you only need one media or why do you need two?
I understand this looks attractive and I understand out there, but let me be very clear. This is a truth bomb coming for you. For now, in the current system, this is not your best play. I’m not telling you this to get you as a client or sell more deals because most of you don’t live in Southern California and I don’t care. You guys know why I started the show.
The deal is straight up. You still have a better option right now to get the best deal in an industry that is not being very helpful to explain this to you. Fine, that’s my role. Let me do it. I can’t emphasize this enough that you can listen to me or you cannot listen to me, but understand that where I’m coming from is all I want is I want you to take advantage of every hack and money-saving tip that you can.
The way things are going right now, I know that on the whole, the industry sucks when it comes to first-time home buyers. They’re taking advantage of you, so I’ve been helping my buyers and now you take advantage of the best options of what’s being offered to you and that isn’t the do-it-yourself route, using the internet route or using the seller’s agent route.
Despite what you hear or what you think you might know from the research that you’ve done, your best play is a free paid-for by the seller professional advocate to help you negotiate the difficult aspects that you can’t do alone by yourself on the internet. That free professional advocate that’s still being offered nowadays.
iBuyers and the internet could be the way the future and it could be the way that the current system collapses. Frankly, the real estate industry deserves it since they suck up so hard to people selling their homes and they ignore all you buyers, especially the first-timers but for now, your biggest hack is besting in beating the system with your free hired gun and that’s never been more true than right now in the Wild Wild West of 2022 to real estate.
You need to take advantage of the game and that game nowadays is different. It’s like there’s basketball and in 2022, they put trampolines, Loch Ness monsters, snowballs and a whole bunch of crap we’ve never seen before. You need a pro. I’m telling you right now, someday this is going to change and I’m going to be doing a different show like a hologram that projects over your treadmill. How creepy would that be me standing over you talking?
Let me give you some insiders. Why is this happening right now? There’s a lawsuit. It doesn’t look like it’s going to go anywhere. The lawsuit is very telling. It’s from one of the big internet real estate players who is trying to sue the National Association of Realtors and MLS, which is the Multiple Listing Service. They’re trying to say that buyer’s agents should basically be illegal and sellers should be able to sell their homes themselves online on the MLS and not pay a buyer’s agent.
Now that sounds logical. There are parts of it like, “I don’t understand why is that.” Let’s dig deep and find out why would an internet company be sued for this? The answer is so that they can get all the homes for sale on their site. They can get all the listings and then they can use their strength, a thing that they put all their money into the internet to be the main vehicle, to help people buy and sell homes.
The catch is they would get the sellers of the homes to pay them directly to sell their homes. What happens to the buyer’s agent? That’s gone and you have to work with the internet realtor people. Who pays for the internet realtor people? You do. The buyer pays for the right to buy this home instead of the current system where the seller pays the buyer’s realtor. Let that sink in for a minute. Right now, the internet is the established medium we use to communicate and it has changed the way that we interact. It’s not changing. It changed. The internet’s here and everything’s different now.
We have a new medium emerging right behind it. You can say what you want about it, but the blockchain is coming and it’s starting to change the way that commerce will be done in the future. In many ways, we’re slowly turning the global structure of economic commerce towards a consumer directly to a consumer platform.
It’s out there, blockchains, cryptocurrency, social sourcing. They’re all changing financing and global commerce. It’s attempting to not only eliminate banks but to eliminate anything that has any government regulation as well. Now, hang with me on how to buy at homies. This is real stuff happening. I’m telling you that you understand the advantages that you need to take care of, that you need to take advantage of now before the whole thing changes.
I’m not some dorky old man in an office spilling cringy dad jokes all night. I take this crap very seriously and I want to help you take advantage of the world now, so you’re financially set up when this new world hits. It’s not going to happen tomorrow or in the next 3 to 5 years, but it’s coming. You’re starting to see the beginning of it. People are trying to lure you in, especially those of you who might be a little bit more advanced and maybe you’re working in crypto. Maybe you understand this stuff and now you’re going, “Why do I have to do it this way? Why don’t I do it the new way?”
In the future, the exchange of goods and services will look to replace or eliminate the middle man, all the mediators, the processors and the contract rider. Technology is going to indeed overcome and eliminate many of these people because the consumers will gain the technology to interact amongst themselves. Look what happened to the taxi and limo industry. They thought Uber wasn’t going to work. They laughed at it.
In the future, contracts, on the whole, are going to become a process that is going to be replaced by technology in many different sectors. Consumers will have more avenues to exchange goods and services directly with each other. That’s bad for big banks and bank fees. Internet and apps were bad for taxis. Google was bad for the yellow pages. Netflix was bad for Blockbuster and tons of other businesses that we saw disappear that were staples in our life that we thought were going to be there forever.
Let your fingers do the walking in the yellow pages and make it a Blockbuster night. Nobody thought that stuff was going away. It felt like movies. Movie theaters were here many years ago and they’re still here now. You thought that stuff was going to be here but it’s gone. This is going to be good for some consumer transactions. Frankly, I believe that it’s still going to be scary for these big transactions that leave you consumers unprotected in that open new world of the metaverse.
This transition is coming, but for now, you first-time buyers, your best play is to understand the internet out there. They’re trying to do this, but you have a better play. Remember, this is a weird concept to figure out. The information that you get comes from the internet and the people that are buying and selling goods at the highest level on the internet that’s the most information that you’re seeing because they’re doing the most advertising on the internet. Does that make sense?
I know right now you’re learning from some freaky older dude. I called myself old. Drinking, sitting alone, talking to the microphone but I’m doing it so that you can take advantage of what’s happening right now and not blow ten years of your life on rent like I did. Know the rules, know it’s a game and work the game. You buyers have the power for now. You’ve got the power and when you’re educated and empowered, when you know the rules and when you realize that for free, right now, you can hire a professional that gets paid for by the seller, the advantage is you for now.
I said it might take a generation with this change but for now, these are the insider hacks that you need to know to help you set yourself up for life. To those of you who still want to email me about some fancy new internet tool that you are sure gets you a better deal, let me respectfully disagree with you and that’s based on my sixteen years of deep dive into the sector.
Every internet-based platform out there for buyers, every iBuyer site, Auction.com, Opendoor, Redfin, Zillow, there’s even a new one called Swami. That’s where you auction off your right for some realtor to open a door for you to see a home for sale. You have to auction it off. I’ve already figured out a way for them to make a little more money for $39, $49, $59 showing. That’s a real thing.
Who is going to sell you that house when you win the auction? Their realtor. All the internet home buying platforms out there are benefiting one person in the deal, the seller. For now, the game is giving you a better option. That’s the free buyer representative. Save your question is on the internet options if you have them because I’m going to tell you, “You got a better one for now. Go listen to episode 72.”
This panic reader ended up being a good topic. I can’t remember if it was a text, an email or something. He went to my website, DavidSidoni.com or HowToBuyAHome.com, filled out the contact form at the bottom. There’s a place you can leave a question. If you have some, feel free. He wrote it funny. He goes 1, B, 2, C, 3, D. Here’s how it goes.
One, I found your show on a hike a couple of months ago and crammed all available episodes. B) Thank you for spitting the knowledge. Two, I don’t have a unicorn team. C) I put in an offer that I am comfortable with, which was accepted. It’s me again. Here it comes. This is the part where the problem is they want to get bailed out because they don’t have any unicorns. Number three, I’m not sure if my current agent, by the way, the second one in this process, is working in my best interest or funding their holidays. This came in in November 2021. D) How do I balance these concerns versus wanting to remove myself from my current rental situation. Thank you for filling my ear holes as I walk in the wilderness and any advice to be offered would be appreciated.
I read that and my spidey senses were tingling on high alert. This happens to me all the time. It’s like Groundhog day. I wake up and every day, I find someone who’s figuring out how to do this. Some of them get into it and they run into a problem. Look before you leap. They didn’t look, they left, leaped or they more leaped.
I immediately reached out and texted this dude, but before I could get an answer to my text, there was another one that came in. The reader said, “I put in an offer that was accepted and would like to move forward with the purchase. My main issue is dealing with whom I should finance with. I have a couple of preapprovals. One is from a national bank, who’s been transparent with rates and another from a national lender, who has not given me a specific rate. I was hoping for guidance from my agent but that hasn’t happened.”
I’ve seen this so many times in my career. For a while, at the beginning of my career, I became Captain Bailout for my friends or friends of clients. After enough time, I’m catching people a little early and we can avoid issues like this. When this issue happens, what’s the lesson here? What’s the moral of the story? Prepare.
Put the planning horse so far in front of the cart that the cart is back in the next county, plan and prepare. There’s no way I could say it more. Maybe slow your role if you’ve been doing this on your own or with some internet realtor help or some part-time realtor guidance. Think about it. Is this the move that you want to jump into and make a mistake so gigantic and make that move knowing that you’re not getting the best advice you could?
I wish I had some cool sign with words on it that I could put on my office wall-like, live, laugh, love or something in that shabby chic wood. It’s very HGTV, but I don’t because if I did, it would be pretty harsh. It would be in this beautiful shabby chic wood and it would say, “Make a plan first before you go to an open house, you dumbass.” Those are the words on my wall. Do you like it? I don’t think I’m going to get a lot of clients that way.
The answer to this one is simple. If you’re too close to the end of the process and you found this show, it’s time to scroll through the titles, read and regroup. How do you take advantage of the current market and not get burned? How do you trust your resources? You read the blog post, you learn and you don’t get into this unless you’re with somebody you trust or you’ve got a unicorn team that cares about you and your wellbeing. Their business grows and you get rockstar service. You’re never going to have to wonder, “I’m about to buy a house with this guy, but I think he’s trying to fund his Christmas fund.”
Timing The Market
The next question, since we talked about crazy or the market is. This topic is timing the market or waiting out the crazy market. The question I hear all the time and I got a DM a couple of days ago, so I’m going to read it to you. It said, “I’m trying to buy my first house this year. I’m in Dallas and the competition is intense. I lost out on a home. I put in an offer over the weekend and there were 40 plus offers in the first weekend it was on the market. Is it smart for me to maybe consider renting another year or so until things settle down rather than moving into a house that I have to settle on and not want to like?”
This sucks. The market right now is this way and I’m hearing this all the time. Forty-plus offers, that is happening. All the more reason you need to have a badass realtor and a mortgage pro on your side. Mr. or Mrs. Panic Reader from the first question and now topic number two, question person. Here’s how I’m going to answer this one. Remember the readers said it is smart to consider renting another year or so until things settle down rather than move into a home that I have to settle on and not the one that I like.
The answer is if you have the means to buy anytime soon and you have to go through all the other episodes, read or find the episodes about how much do you need to buy at home or prepare. If you’re paying rent and you still would be during the time while you chill out and wait for things to, “Settle down.” The answer is no. The math says it’s not smart at all. That’s the answer.
I’m not going to go on all math. If you want the math, go to HowToBuyAHome.com, where you can read the transcripts of episodes 36, 40, 57, 62, 68 and 70. It’s all there you can get it. You can comprehend and digest it. You’ll be in a position where you’re going to believe in the numbers, data and best time for anyone who has the means to buy a home. Anytime soon, who wants to buy a home at some point in their lifetime was yesterday. That’s because of where the market is going, where it’s been and historically, what’s going to happen? If you’re waiting for things to “settle down.” It’s going to cost you more in rent and lost equity than it will help you.
Waiting Until Your Lease Is Up
The next topic is waiting until your lease is up. This is a question that I get a lot. It’s something I hear all the time from people. I put it right after the waiting for the market to settle down topic because the math and the data that backs up my answers are in the exact same episodes. There are three things that are most important when you’re buying a home, location, location, location. The realtors are funny.
I say, “It’s timing, timing and then location.” Everyone says, “Location, location, location.” It’s actually timing, timing and then location. Here’s the way it works. When it comes to leases and the timing of your move with the end of your lease, so often, I see people choosing an arbitrary date that was decided by you. Whenever it was, that has very little and oftentimes zero mathematical data to back up the decision on that date, except for what is truly in the big grand scheme of things small little expense that it is to break the lease.
Don’t judge me on that. You got to hear me out. The reason why that date is picked is because it’s arbitrary, it’s there and no one wants to spend money. A lot of times, it’s based on fear, lack of knowledge, confusion or ignorance, which I’ve explained before is not a bad word. We’re all ignorant of lots of things. Sometimes it’s simply the easiest and most comfortable date to choose, especially if it’s further away. You don’t have to stress and panic about figuring this stuff out right now.
I told you to give me a little slack here because I know saving any money is important. The messed up thing is you’re buying a home and it’s hundreds of thousands of dollars decision. Many people decide to time this gigantic six-figure decision based on a couple of thousand dollars to break a lease. In a normal market, it’s usually well worth it for you to do and explore the options of breaking your lease.
If you’re looking to buy something now, maybe the interest rates are at the right place. Maybe a good house came up in your market or in a normal market, you found a home that has been on the market a little while and you can get a deal. That deal is going to save $10,000, $25,000, $50,000 on some killer home bargains.
You’re going to pass on that because you want to wait four more months so you can save $2,500 from breaking your lease. Do you see and feel me? That’s the normal market. Where we are right now, the beginning of 2022 is anything but a normal market right now. Homes are getting more expensive by the minute, while mortgage interest rates are also going up this 2022.
If you want to hear more about that in those numbers, episodes 36, 57 and the urgent alert episode number 70. I’m telling you, if you looked at home on Zillow, I guarantee you there are already 25 offers bidding on it right now. It’s already tens of thousands over the list price and that’s going to keep happening all the way in 2022, no matter when your lease ends sometime this 2022. Start your prep now. Work a plan immediately. Maybe you can be ready before your lease is up and that money that you’re going to “lose” you’re going to save or gain a lot more with the equity you make in your house and the potential of a higher mortgage interest rate later on in 2022.
Save Money By Using A Part-Time Realtor
The next topic is people want to save some money by using a part-time realtor, a friend or a relative. If you don’t know my answer to this question, you’ve got to be a new reader and that’s cool. I’ll go through it with you. Here’s the deal. I applaud anyone trying to work a side hustle. I am down with that. It’s great. I freaking hate that this stupid industry has accepted that it’s fine for people to become licensed realtors by basically fogging a mirror, signing their name and letting people do this part-time.
It is so much home for you to sleep there. It is so much more than showing you homes and opening doors. Would you leave your $500,000 401(k) help or your retirement guidance to some person that manages finances part-time on the side or in the summers because they’re a teacher? I put my hands up to my face and rubbed my cheeks.
I’ve expressed this opinion on God loved the people doing this and I’ve expressed it in a much nicer fashion in other episodes, but I’m feeling salty now. Lots of love and positive energy to the part-timers, cops, fire people, teachers, housewives and husbands who are realtors 2 to 3 days a week when they’re off from their other job.
If you think that a part-timer is best for you because they’re a friend or a relative and you guys get along, remember this, you’re helping them with their income for their side hustle. How are you helping them? It’s by spending your income at the closing table and possibly in the next 30 years, every single month with your mortgage payment, you’re helping their income with your money and until they change the standard because you got to realize, any bozo can get a real estate license. For some reason, people go, “You’re a realtor. They must have had the training or the scrutiny of a doctor, a CPA or even an insurance salesman.” No way. You would not believe how little it takes to say, “I sell houses.”
The problem is 50% of the people get their licenses. Try it and go, “This sucks. This is hard,” and they bail, but some of them keep their license every year. They wait for someone like you, “You’re a realtor. Cool.” For now, until that changes, I say it’s not best for you to use a part-timer, just like I believe that it’s not best for you to use an internet company right now. I can’t emphasize this part enough. Have we talked about how nuts 2022 is? In this market, more than ever, you need a pro to get a whiff. Sometimes even that won’t be enough. Some of that stuff you might have heard, but this last topic is something I get from a lot of people. See if this helps you out.
When Should You Pull Your Credit?
We’re going to talk about pulling credit and no one likes to pull credit. When you do, it’s called a hard pull and people are asking you, when should I do it? From a reader, “Thanks for your advice. We’ve been able to see what we can afford with more clarity, which has gotten us steps closer to be being homeowners. While we both have good FICO scores, I know from your show that lenders measure a median of the scores. I was wondering if you think we should both do the hard query or pre-loan approval to understand where we are exactly as individual credit scores? That way, we can discover if one of us needs our credit boosted, possibly through the authorized user method that you suggest or do we have one pre-loan approval and see where each of us stands in terms of credit?”
There’s a lot of detail in that question but the big thing people ask me when they ask questions like this is, they’re trying to say, “We want to pull the credit, but we know that it is a small ding on your credit report. It’s an inquiry and you drop some points. What do we do?” Here’s the answer. Do you want to buy a home someday? Pull your credit now. End of the story, the end. Do not question this fact. Let it sink in.
If you want to buy a home in 2 weeks, 2 months, 6 months or 2 years, get full loan approval with a credit pull now. Yes, that’s called a hard pull and you should do it. I know that some of you out there still don’t believe that and you’re not going to do it, but here’s the deal. At some point, when you buy a house, the lender has to do a hard pull credit inquiry on your credit. Yes, it will be a 2 to 4-point hit on your credit. It is going to happen anyway. It is far better to do it now than to do it 30 days before you buy a home because you never know if you are on the edge of the credit tier and the credit tiers determine how much you pay for your loan, you’re points, your interest and your PMI.
This is a huge thing. The tiers are every twenty points, 640, 660, 680, 700, 720, 740 and 760. Now 760 is the top tier. You’re not going to get any better rates, fees or anything if you’re above 60 and that’s the guidelines in 2022. That 2 to 4 point that you get for a hard pull, if you are not exactly sure which score they’re going to pull or which one is going to be? That could drop you down in your credit score and drop a tier, which is going to cost you more money. You’re only going to have about 25 days to fix it because you’re trying to close in 30 days and they pull the docks a few days before you close.
If you pull now, you have months to work the system with the tips, the tricks, the hacks that I’ve given you and, more importantly, with your unicorn mortgage pro. Time is everything with credit. The more you have, the more you can improve it. You’re going to have to take a hard pull at some time to buy a home. It’s required.
The more time and you have to raise your score, the less chance that you’re going to drop a tear right before you ask for the biggest loan in your life. Is that clear? Because people still fight me on this one every single day. If you’re going to tell me, “David, I hear that when I apply for a loan, the approval’s only good for 90 days and I want to buy a house in four months. I don’t want to do the credit pull until the last second because if I do it now, it’s going to drop.”
In general, what I said, I still believe in. There are exceptions and a lot of those people who call me, “I don’t know why, but they talk to me like this. I’ve made that up in my head. That’s how I read their emails.” Some of them have 800 credit scores. If you’ve got an 800 credit score, you want to gamble and you know that your credit score of 800 that you got somewhere is exactly the score the banks are going to use for your mortgage when you try to get a mortgage in four months. You don’t want to get it now because in only the last 90 days.
You got to know what it’s exactly the one they’re going to pull because I’ve mentioned it in other episodes, you have 28 different credit scores and there’s a bunch of them. If you are comfortable with it, you think all your 28 are going to be 100 then and only then if you want to gamble, cool, you can wait. The best way for a lender to help you get the home for the cheapest fees, price and everything you’re trying to do is to find out exactly where you are now.
Remember, 760 is the top tier. Four points are not going to hurt your 800 super credit. I’m repeating what the reader said. They said, “I know from the show that lenders measure a meeting of the scores. I was wondering if you think we should both do the hard query for the pre-loan approval to understand exactly where we are. That way, we can discover if one of us needs our credit boosted, possibly through the authorized user or can we do a pre-loan approval and see where each of us stands?”
It’s true. You do have 28 credit scores, with each of the three credit bureaus are each going to give the bank a score. You’re going to get three scores from them but each of them has 28 different ones and they choose from. They take what’s called the mid score or the middle score. If they go through and choose from your 28 different scores. Each of them gives a score to you and your lender. They’re going to go, “You got 805, 759 and 758.” What should your score be? You think you should probably hit an average. There are three scores and that would be 774.
The top tier is 760 and your average is 774. What I did to get that average was I added up three scores and I divided them by three. I didn’t even have to call my mortgage pro to decipher that, but no, they don’t use the average. They use the middle score, what they call the mid-core and that mid score, 805, 759, 758 is 759, which drops you down to the second tier, not the top tier. Will it mean that you can’t buy that home? Probably not, but it does mean that in the fees, interest and payments, you’re going to pay more.
If you’ve got two people out there applying for a loan, you should probably both people go ahead and do a hard pull. Six months, 1 year or 2 years before you want to buy, then you have the time to increase and to boost your credit scores because you know everything you’re not flying blind. Since when you are going to be ready to make an offer, both credits are going to get a hard pull anyway. If you don’t know exactly where you are months ahead of time, you could do that hard pull right before you’re ready to buy and drop a tier with no time to correct it and you’re never going to see it coming.
If you’re reading this thinking, “There he goes again, talking about people with 800 credit scores buying $700,000 homes.” That’s not me, man. Let me direct you to the last episode where a reader, who was unemployed with zero credit. He called his bank for a home loan and they said, “No.” He called Zillow for a home loan and they said, “No.”
He found the show, got a unicorn realtor, sent a unicorn mortgage pro, worked with him and in less than a year, he closed on a $200,000 home in Michigan. Randy rocked it with a unicorn pro. In 2021, 25% of the mortgages were approved for people that had credit scores in the 600s. If you’re thinking about this, the earlier that you can find out exactly where you stand, you might be able to pull this off sooner than you think.
You don’t need an 800 credit score and you don’t need to buy a $700,000 house. Twenty-five percent of the mortgages in 2021 had credit scores in the 600s. The janitor was sweeping the halls and I’ve been here for sixteen hours a day. I helped dozen or so readers find a unicorn. I had two Zoom calls with one buyer looking to put $200,000 down on a $1 million home and one buyer who had less than $5,000 in the bank. He is getting some money from mom and dad. He can buy a $250,000 or $300,000 home. I interviewed Randy, the man with no job and no credit score, who called me from his three-bedroom, one-bath home on a quarter acre that he closed on a month ago.
I am beat. If you could help me out, please. It would be super if you could write a review for the show. I’m serious about this gang. It helps me so much to get the word out, so other people like you are going to find this when they search for help, especially on Spotify. They opened things up for reviews. Get on Spotify, read one episode and then write a review. You got to read it before you do it. Let’s push the show to the top of Spotify reviews so we can help many more people.
Share this show with your friends. If you want a unicorn to help yourself and you have a question for me, go to DavidSidoni.com or HowToBuyAHome.com. Fill out the question form for me. You can always DM me on Instagram @DavidSidoni. I’m here for you. If Randy in Michigan, captain jobless, has zero credit, can close a three-bedroom home with a basement and on half an acre. If Captain Randy can do it, you can do this.
- National Association of Realtors
- Timing Your First Home Purchase With The End Of Your Lease – Previous episode
- Should I Buy My First Home Now, Or Wait? Question Of The Week – Previous episode
- It Will Cost You Much More To Wait For Things To Cool Down – Previous episode
- 2021 Recap And 2022’s Forecast – Plus, First Time Home Buyer Fundamentals – Previous episode
- 2022 Housing Market Forecast For First Time Home Buyers – Previous episode
- URGENT 2022 Housing Market Update For First Time Home Buyers – Previous episode
- Spotify – How to Buy a Home
- @DavidSidoni – Instagram
I hope you are getting your questions answered about this crazy process. I know there’s not a lot of clear information out there on the internet, so that’s why I started this podcast. To demystify the whole thing and get you first timers the help you deserve! Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, please subscribe. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts. Let’s change the way the real estate industry treats you first time buyers one buyer at a time – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!