Keys to the Coast Podcast featuring Barbara Melvin with BMR Melvin Consulting LLC

In today's podcast I'm here with Barbara Melvin with BMR Melvin Consulting LLC and we're discussing how important credit is when purchasing a home, how it affects your mortgage interest rate, credit repair myths and why credit is so important with how it relates to your financial goals.   Grab your popcorn because there is going to be a lot of useful information shared!

If you would like to contact Barbara, you can reach her at 239-248-8474
Or
https://bmr-melvinconsulting.com/

Looking to purchase a new home?  Contact me, Darrel Peters @ 804-402-0397 or DarrelRPRealtor@gmail.com.

Check out my YouTube channel at: https://www.youtube.com/@DarrelPeters_Realtor

Transcript

0:10

Hey there, ladies and gentlemen. I am Darrell Peters with Realty One Group MVP, and today I have my special guest, Miss Barbara Melvin. Barbara, how are you? I'm good, good. So good to be here. Good, good. Glad to have you here today. Uh today we're going to talk about uh credit and uh how that affects uh you know getting a mortgage, your mortgage rate, your interest rate, um, how much you pay for the loan, that sort of thing. Um Barbara specializes in credit repair, so we're gonna talk a little bit about that as well as some other topics. So, uh Barbara, you want to go ahead and uh start us off and introduce yourself? Sure, I'm Barbara Melvin. Again, I was a banker for over 33 years, so I know all about credit, know all about lending. That's one of the things I love to do. And uh my husband and I, we have our own consulting company called BMR Melvin Consulting, and we got together with my experience and his experience to just put things in place so we can be a one-stop shop for that business or personal owner. So if they need from credit to loans, if they need um, what else we do? From uh uh just one of that, oh, cash back. We was in many, many different businesses that we do with BMR and Melbourne Consulting. Okay, great, great, great. And how did you get into that space? Uh, really in 2023 when I was laid off from the bank and we had so many years of experience, my husband's like, instead of going to work for one bank, let's work with them all. So we've been able to work with all the banks out there where they send us their clients that have credit issues and they need a loan, but they're not bankable. We have different loans and different lenders that we can refer them to and we're able to help them. Okay, great, great, great. Yeah, so uh I know we were talking earlier, we have a couple of uh some discussion points here that we uh wanted to touch on. Um so the first one is uh why does credit matter or why does credit why do credit scores matter when you're purchasing a home? Credit scores are very important. In fact, when I was in banking and working sort of in the underwriting um area, the first thing we looked at was your credit. And to us, your credit is your word, which is your bond. So if you're not paying back other people, why is the lender gonna give you money? So, you know, credit is really that look back as to what you've done in the past. Gotcha, gotcha, gotcha. Yeah, I mean, uh I guess a lot of uh some common misconceptions um about you know credit and mortgages is that you know you have to have uh an 800 or better credit score. Uh and the banks do typically want you to have, you know, a decent credit score. But uh yeah, let's let's talk about that a little bit. What are kind of the baselines for credit scores for uh mortgages? Now we were in the lending position, banks they like you to have at minimum 580 credit score for FHA. However, the federal law really a 500 credit score is what FHA can be. That's a federal home administration. However, when you're looking at the lender, the better the credit score, the better your interest rate will be. So we always want to have people that have a really good credit score. Right, right. And what what makes up a good credit score? I I hear there's a a thing called a credit mix. Uh yeah, let's talk about that a little bit. What what makes up that credit mix and why that's important? Yeah, it's so important because with the credit mix, what they look for is first of all, how much credit do you have? So how much money do you have out there, your what they call debt-to-income ratio, how much debt you have in regards to what your income is, so how much are you paying out, how much is going in, and then what you're looking at too is your ratio of your amount of money that's out there. So they want you to have at least 30% or less. So if you're revolving credit, how much money you have, they want you to have 30%, 30% or less of utilization. So I always tell people, is they say 30%, but if you can do 20%, then you're better. Because the better it is, you know, the better it's gonna help you. So I tell people if you can keep your utilization under 20%, then if it just happened to go to 30, you're okay. But if you had 30 and you go over just a little bit, that you know, that lowers your credit score. That might cause a problem, right? Yeah. Yeah, I mean, I and I know there are um, just looking at my notes here, there are credit score requirements for home loans. I mean, there's um for FA FHA loans, like we talked about a moment ago, VA loans, uh, there's USDA loans, conventional loans. Uh conventionals are probably um, those are probably the ones that require uh the higher score score. Yes, 680. I feel like the minimum is 680 for a conventional credit. And the good thing about conventional too is that you can put down, you know, lower money, or actually you can put down less money, but if you're looking at 20% or more that you're uh not putting down, then you're looking at what they call PMI, private mortgage insurance. So if you're putting down less than 20%, you're going to have to pay that private mortgage insurance. Okay. Okay. Yeah, yeah, absolutely. So what are what are some common uh credit issues that uh home buyers face as far as like uh missing payments and things like that? And we we tell people if you're going to buy a house in the next two years, definitely look at your credit. Don't go out there and buy anything that's gonna show on your credit report, which could even be furniture, it could be even a small credit card. People think, well, I'm just going to the store, and you know how they say, well, if you get a credit card, you know, you're gonna get 10% off, or you don't have to pay for 90 days. Getting new debt can really hurt you. So we always look at having older debt. How much do you have in older debt? But don't buy anything if you know you're gonna get a mortgage. I would say two years. Sometimes they say less than one year. If you know you're gonna go for a mortgage, do not buy a car, do not, you know, do anything that's going to affect your credit. Because when they go to pull it, they also look at how many inquiries you have. So if you have, you know, two or three inquiries, that can hurt you as well because that stays on your um credit for at least 12 years. So when they I mean 12 months, so when they look back at your inquiries, and then if you're getting decline, that really hurts you because you're getting all these inquiries and you're not getting approved. Right, right. So that hurts you as well. Yeah, don't don't go out and buy the new car or uh, you know, even uh even if you're under contract, uh you know, for a new for a new home, yeah. Do not buy any appliances for the new home. Right. And wait until after you close, buy the new car after you close on the home. Because uh, yeah, that can that can definitely mess you up. Um so what are some credit repair strategies? Uh I know I have a couple of things here, uh like reviewing your credit report and disputing inaccurate information. Mm-hmm. Yes, and we tell people at least once a year you should go out and look at what's on your credit. Whether you're buying anything, whether you're um buying a house or a car, always look at myannualcreditreport.com. My annualcreditreport.com because every single year you get your free analysis of all three credit bureaus, and it's free. So I tell people go and look because even for me, being a banker, you know, having decent credit, I had stuff on my credit report for experience that was not on Equifax, it wasn't even on TransUnion. So my experience score was lower than Equifax and TransUnion because the one thing that was on there that should have been gone a long time ago. So if you really look at your credit every single year, it protects you. It protects you from fraud, it protects you from mistakes. Sometimes it's mistakes on there. My credit had, my name is Barbara Rhodes, R-H-O-D-E-S Melvin, but a Barbara Rhodes R-O-S-E was on my credit. So we went to refinance the house, and we had a barber. Now luckily she had good credit. So it actually helped to bump my score because she had, but what if she had bad credit? That could have hurt. So I always tell people make sure every year that you're looking at that credit report. Right. Every year. Right. Yep. And uh just another note here what not to do before buying a home, buy a new car, opening up new credit cards. We just talked about that. Uh the mortgage pre-approval process, um, yeah, so lenders look at uh besides credit, they look at income, uh, your employment is history. Uh definitely they they look at the debt to income and they look at uh assets and reserves. Um and that's why it's it's important to get pre-approved uh early in the process when you're looking for a home. Uh, because you just want to make sure everything is on the up and up and that you're not gonna have any problems, you know, obtaining a mortgage or or the uh the amount of money you're gonna need uh from the bank in order to close on the home. Um what are some credit myths out there? I I know people think if they pull their own credit that that can uh that can help them, but is that true and or no? I would say no, because a lot of people do credit karma and they go like, oh, well, you know, my credit karma said I had a 700 credit score, but when we go to pull, you know, TransUnion, Equifax, and um and what's the other one? Experience Experience, right? A lot of times the scores are not there. So I always tell people go directly to the credit repay or the credit um sources out there because credit karma is gonna be different. Other places, when you look like Wells Fargo now has where you can see your credit score. Every bank now has where you can see your credit score, but their scores are different than what the actual scores are. So really I tell people always again, pull your own credit score, which you can do every single year and know what that score is, and then start working towards how do I make it better, which is having a utilization, making sure that you're not doing a lot of inquiries, making sure that you're not out there um getting more, you know, credit out there. So you always want to try to see what I can do to make sure that my score is high. So how how long does it typically take for, so it's just so the people out there know, how long does it typically take for credit to improve? Is is that something that happens overnight or not? No, it definitely doesn't. In fact, the credit, um, credit reporting agencies have like even like 30 days to even look at. So when you when we send out a letter with our credit process, we have um AI technology. So we have had clients that have their scores have been been increased by like over a hundred points because they had a collection. One collection can really bring you down. But it does depend on each individual. So what my report may say, I may have, you know, 30 um 30 points that may be raised because maybe a bankruptcy was on, but that was 15 years ago. Should have been off my credit. Shouldn't I be, you know, following me. So stuff like that can get off. People think that, oh, well, you know, I got a student loan on there, that can't come off. It is different ways that things can't come off your credit. So, yes, you can do it yourself, but I always say let the experts do it that have, you know, the ability, like with our system and stuff, it really does work. We really have helped people, but it does take time. So I tell people it's not gonna happen overnight. Most of the time it may be like 45 days or more, because again, the lend the um credit people, I mean, it takes them like 30 days to even look at review it. They have up to 30 days. Right, right. And I I think most of these companies now, don't they have online uh disputing systems where you can just go online and dispute a few items, check a couple of boxes and dispute whatever late payments and yep and uh inaccurate information. Yeah, and that's why it's important to, you know, look at your credit, you know, uh a good year or two in advance before you, you know, uh if you're not sure what your credit looks like, to uh to look at that uh you know early on in the process so that you're not caught off guard uh when you do uh you know go for a home. Um so what is the uh what is the biggest credit mistake you see from home buyers? Is it making those big purchases, you know, uh when they're trying to buy a home at the same time? Yeah, that's one, and then a lot of times two, not being not being prepared. Because people think, well, when I rent, I'm okay, but a mortgage takes even more than that. Because a mortgage really is like principal interest, taxes, and insurance. Right. TI TI. People think, well, you know, I can afford my I can afford a mortgage because my rent is $2,000. My mortgage is gonna be $1,800, but it's a lot more that comes with that mortgage. Even when you are looking to purchase, what people don't realize too, they have to have reserves, which means money saved up. Because when you go to get pre-qualified, the first thing they're gonna ask you, how much money do you have in your bank account? They're gonna look for at least three months' worth of bank statements. So if you're not showing that you have like a lot of income coming in to support that mortgage, then you always want to make sure that you have some reserves. And reserves can be like a 401k, a retirement. So you can't have money in other places than just your bank account. But you do want to make sure you have at least reserves that will cover 90 days of your mortgage payment. Okay, okay, great. Yeah. So what uh what kind what kind of scams, uh credit repair scams, should people be aware of out there? And it's quite a few. It it is, and when when people say that uh, hey, you gotta pay us $5,000 to do your credit, no, you know, it shouldn't cost that much because really um you can do a lot yourself. Like I said, with us, our program, we love it to where it's very reasonable, $189 to start, and then it's $99 a month. But we also have on there um ID for ID fraud protection because so many people have fraud on their account that they if they have a program, then they can get alerted. So if anything happens, you know, you can also put it on your yourself by doing the social security number. So when you go in, Aquifax, they all have it, so they have those alerts. So if anyone is pulling your credit, you're going to get an alert. You know, so it is a lot of things that you can do for yourself just to stay protected. Gotcha, gotcha. Yeah, another thing I wanted to touch on. Um, can someone actually buy a home with uh collections or bankruptcy on there that's still on there? They should be credit, or uh does that does that have to fall off first? No, no, they can do it. You just have to have a letter. You have to have a reason why, because um many times bankruptcy comes in from a married couple. You know, when they're getting divorced, and you know, it's like, oh, well, now I have to take on these bills, I can't afford it. So, you know, a lot of times the lenders, I did more just over 10 years, the lender will actually look at each person's situation. Why did you have that bankruptcy? Why did you have that collection? Many times, and I'm glad, I think um, what, a year ago, they were supposed to look at your medical collection and do not count that. Because medical have kept so many people from medical collections, I should say, have kept so many people from getting a house because those collections have brought down your score. Right. So you can have one collection, one medical collection, $700 one month, you get a medical collection, it may drop it to $580. And that's not fair because you paid everything, you've done everything right, but one man, and sometimes you think that you're paying the insurance company and they didn't get paid, and then they report you, and you have no clue that that's on there. Oh, wow. And we've seen that many times where people didn't even know they had the collections on their credit until they went to buy the house. Oh, wow. And it's like, what? Why is my school $580? I pay everything. And they look at that, you know, one or two medical collections. Right. And it's like, so I know that they were talking about getting that removed because that has hurt so many people. Yeah, yeah. And maybe it's one of those situations where uh it showed up on one report of the other two, or it shows up on two but not the third. Exactly. So you look at the first two and you're like, oh, I'm good. And but the lender pulls that third report, it's like, hey, you got this on your this blemish on your credit report, and you had no idea it was there. So that's uh that's a that's a reason why you need to check all three. Yes. Um so uh what are some uh what are some tips or tricks that you can uh advise the people to uh to uh quickly not raise their credit score a hundred points, but to start working towards raising their credit score, things that they can do on their own that that you know that they can do fairly easily and fairly quickly to get their score, maybe 10 points in a month or something like that. First of all, pull the score, pull pull that credit. So when you pull it, you'll be able to see where you are. So most creditors, credit reports and stuff, it'll show you, like let's say you have a citi bank, and if you have 40%, it would tell you how much you need to have to lower that. So, you know, a lot of even like I said, a lot of the banks now offer where you can look right there on your statement and it will show you where you need to be. So that you can lower your amount of utilization because that utilization is like 35%. So you want to make sure that you at least keep it, like they say 30. But I tell people, try to stay if you can't, below like 20 is great. So at least 25. At least 25. That way you know where you need to be. And that just means that you got a $1,000 card, you don't want to have more than you know, $250 left out of it. Right, got it, got it. Yeah, and tying it all into uh the Southwest Florida real estate uh market right now, which is you know kind of crazy. Uh rates are still high, right? They're still over 6%. Last I checked. Um, you know, they may come down a little bit maybe this summer, but uh definitely it's definitely important to uh keep that credit score up and and you know keep tabs on your credit so that when you do go to buy a home, uh, you know, you can get approved for the best rate that you're able to get. Because that because that mortgage rate does uh affect your affordability of the home. And uh, you know, like you said, there's other things that come along with you know uh buying a home, it's not just uh it's not just the mortgage payment, but you have taxes, insurance, and usually those are tied into the mortgage. Right. They're escrowed in. But you're still gonna have, if you're buying a home, even if it's c a condo, you're still gonna have repairs. Yes. Uh townhouse, you're gonna have repairs. I had a townhouse, a brand new construction, and it was it was fine for the first, I don't know, five, ten years or so, but then you know, plumbing appliances break and you can't go, there's no landlord to go to. Yeah, you're it, you're the landlord, and you have to provide those appliances. And if there's an electrical issue or plumbing issue, that that's all on you. And one thing I want to add to that, since you mentioned that, always have an account, always put together savings account, and I call it a household account. And every time if you're working, every time you get paid, put at least 10% or $100, something, have it going towards that household account because you know something is gonna break. So you should always have an emergency fund. Always. And that way, if your you know, anything goes out, your your washer, your dryer, you don't have to worry about going to credit cards, you have cash. Cash is the best. So if you can put you know aside the emergency funds, that helps. And of course, we live in Florida, we have hurricanes. So when I used to tell people to budget, start living on a budget. And as much as you can, because before that insurance kicks in, a lot of times you gotta do stuff out of out of pocket. So a lot of people, you know, as they're waiting for insurance. Insurance, if you do, you know, go through a hurricane or something, that insurance may not kick in for three months, four months, maybe a year, a year or more. What are you gonna do in that time frame? If you do not have those savings or some cash available, you're stranded. You're hurt. Many people do work from, you know, they're living from paycheck to paycheck. So if you can just start now, as soon as you buy that house, and let's say you were um renting for $3,800, now your mortgage is $2,800, but you have some extra money, put it aside. Put it aside because something is going to happen. Yeah, eventually. And you you are the landlord. Right. You know. Right. Absolutely, absolutely. Yeah, circling back to um renting, um, and I know there's a big debate, you know, renting, buying a home doesn't work for everyone, especially if they move around a lot, if they're, you know, job, uh, if they're following a job, you know, buying a home isn't isn't feasible or practical if they're only in one place for, you know, a short amount of time. But one thing about rent, it doesn't typically show up on credit reports, correct? They they check their credit to get the apartment. Yeah. But after that, it doesn't really and and I know some lenders will um they'll ask you if you're renting and if you were ever late. Right. But I don't think they check with well, actually, we now have a program to where you can actually have your rent being reported. So we do have a program to where rental assistant and it actually shows that your rent is there. So they may ask you, hey, give me a six months or a year of your rent, and we can look and say, okay, this is how much you did pay that year. You know, because I used to always say that too. I said, people can afford their rent, which may be $3,500, but then they get declined for a mortgage. That's $2,000. You know, like, how what sense does that make? You can afford the rent, but when it comes to getting a mortgage, it's just $2,000. But again, it's your credit. You know, many times your credit, many times it's your debt to income. So it may be different factors because I will hear people say, Well, how come they didn't approve me? I pay more in rent than I am going to this mortgage. I'm like, yeah, but you have to remember you do have a down payment. Right. So with that mortgage, you are gonna have at least 3% down, unless you're a VA or you know, veterans where it could be zero money down, but most is gonna be 3%, 5%, 10%, or even 20%. Right, gotcha. Yeah, and I know with the uh VA loans, there's actually uh it's called uh some kind of usury fee. Yes, yep. So they they actually charge veterans to use that benefit. Uh and you have to make that money somehow. Yeah, yeah. And I don't think a lot of people are aware of that. Uh like when my dad was buying um uh this last home that he had, uh, you know, he's a veteran, but he uh we decided not to go that route because for one, you have to use you have to pay to use that. Yes, and uh he has such good credit and he had the cash. It was a conventional just worked out better for him. Okay, but um, but yeah, a lot of people aren't aware of that. But so it's important to look at you know all your options, a VA, if if you are a veteran, VA, FHA, uh, and a conventional uh maybe a jumbo loan. I'm not even sure banks are even doing those anymore. But uh, but but yeah, so Barbara, I want to thank you for uh joining today. And uh yeah, I know we're kind of uh, you know, the Southwest Florida real estate market is up and down, and and uh I'm looking forward to the journey, but definitely appreciate you joining in today. And if uh if you guys out there have any questions about uh credit repair or would like to employ Barbara uh for her services, you can reach her at 239-248-8474. Again, it's 239-248-8474. Great, yeah. And if uh and when you guys are ready to to buy your first home, give me a call, Daryl Peters at eight oh four four zero two zero three nine seven. Uh I'm Daryl Peters with Realty One Group MVP, signing out.