Freeze, Pull, Repeat: The Credit Game Homebuyers Must Master 9/15 Market Update

The Federal Reserve's meeting this week is expected to cut interest rates - Check in next week for the latest announcement! 

The recently passed Homebuyer Protection Act eliminates predatory trigger leads that previously bombarded consumers with hundreds of calls after a mortgage credit check. Listen now for the details!

Also, more critical info to know as an agent and a consumer!

• Options for credit protection include Pre-screen Opt-Out, credit freezes, and careful timing of hard vs soft pulls
• Mortgage shopping allows multiple credit pulls within 45 days with only one impact to your score
• Avoid opening new credit, using Buy Now Pay Later services, or changing jobs during the mortgage process
• Employment verification now happens the day before or day of closing
• LQI (Limited Query Info) checks for new credit inquiries up to three days before closing

Find Nikki on TikTok and Instagram @mortgagesfromMNtoAZ or on Facebook under Nikki Erickson or The Kevnik Mortgage.

Chapters

• 1:12 Fed Meeting and Interest Rate Cuts
• 4:01 Current Mortgage Rate Trends
• 6:46 Trigger Lead Legislation Explained
• 11:22 Credit Protection Strategies
• 14:12 Avoiding Credit Mistakes During Home Purchase
• 17:49 Employment Verification and Closing Process

Transcript

Speaker 1: 0:37

Monday, september 15th, and here is your market update.

Speaker 2: 0:43

Well, good morning everyone. Happy Monday. So we are. It's a big week for us. This week the Fed is meeting and they have their two day meeting. We'll get the press conference on Wednesday. The result of that meeting they are expected to drop their interest rate by a quarter percent. There is a small chance that they'll cut it by 50 basis points or half a percent very small chance, but we'll kind of see what happens. There's also another member of the Fed that is stepping in that is expected to be confirmed today. If they get confirmed today. That will be another voting member on the Fed. His name is Stephen Mirren, and so that confirmation is expected to happen today and then he'll be voting on Tuesday and Wednesday for or against the Fed cut. So in interest rates.

Speaker 2: 1:27

The other thing that's happening during that meeting is that they are doing their dot planning, and what that means is they are putting up basically on a graph where they think interest rates should be by the end of the year. So it's purely their opinion. They kind of just go into this graph and look at interest rates and go boop, that's what I think, boop, that's what I think that they should be. So based on their just viewpoint. It's not based on a group discussion, it's based on their viewpoint and where they think. So it'll be interesting to see the tone of where the members are thinking. Things need to be interesting to see the tone of where the members are thinking things need to be. Also, with Powell leaving office next year, or leaving his I shouldn't say leaving office, leaving his position next year, it'll be very interesting and telltale what his goals are through the end of his term. So we just kind of want to well, it'll be a good week to kind of see what that is From a market standpoint.

Speaker 2: 2:16

That interest rate drop has already been baked into the market. So, basically, what happened around beginning of September, you can kind of see where the news from that Jackson Hole meeting that I had talked about. This is where we saw basically the 30-point improvement in interest rates and they've been kind of hovering around that ever since. So we are in the upper. I've been locking some loans in the upper fives into the low sixes, so that five number is coming. I've also been reaching out to past clients and this is something that you guys might want to do as well reaching out to past clients and saying, look, we are seeing an improvement in interest rates. This is what we've been waiting for Check with your lender to see if now is the right time. I've been telling some people it is because they have other circumstances, but a lot of people I'm like you know what. I kind of just think we should wait a little bit longer and see how things go, because what we don't want to do is refinance somebody now and then have to do it again in three months because interest rates have dropped dramatically or whatever that case is. I'm hoping that the Fed members are going to start kind of putting pressure down to lower those interest rates even more towards the end of the year and then that in turn of course helps that 10-year treasury bond respond with lower numbers, which in turn makes mortgage interest rates lower. So we're very hopeful, but we'll see what happens on Wednesday.

Speaker 2: 3:26

Other big piece I think I had touched on this before is that trigger lead legislation. So trigger leads happen when anyone comes in for a mortgage inquiry If we do a hard pull on their credit, the credit bureaus sell that information right away to companies like Loan Depot and Quicken Mortgage. Those are the two biggest purchasers of trigger leads and they call, call, call, call, call, call, call, call, call, call, call the client over and over again on a rotodialer and clients can get up to 500, 600 phone calls just based on having their credit pulled from a mortgage inquiry. So there's legislation that's the Homebuyer Protection Act 5 is what it's called and that has changed the trigger leads, or the ability for mortgage companies to have trigger leads, so it cuts it completely off and puts the control back on the consumer. It'll be interesting to see what happens with companies like Loan Depot and Quicken Loans and things of that nature that depend very heavily on those trigger leads for a major part of their business. It'll be interesting to see with companies like Loan Depot and Quicken Loans and things of that nature that depend very heavily on those trigger leads for a major part of their business. It'll be interesting to see what happens with those and to see how their volume changes and their way of doing business changes.

Speaker 2: 4:31

But it's an extremely important part of my just everyday life to have that be a part of it, because there are things that we could do to try to prevent trigger leads before this legislation, but most, a lot of times they were unsuccessful and so having to have a conversation.

Speaker 2: 4:48

Being like oh yeah, I'm going to do a pull on your credit and watch out, you know this is going to go crazy, is not a great conversation to have. And so this really does protect the consumer and it's a long time coming and I'm so happy Like I couldn't be happier that this legislation is in place because it's you know it's can you imagine like every time you talk to a client, a first-time home buyer, and you visit with them and you have a really good value conversation, and then all of a sudden you must, 45 other realtors are just calling that first-time home buyer incessantly? I mean, that's really what it came down to. So it really does protect the consumer and it was actually a lot of that legislation was lobbied for by the National Association of Realtors. So it's in everybody's best interest, and especially in sellers' and buyers' best interest, to have that legislation in place. So it didn't necessarily happen on soft pulls, but anytime we did a hard pull, oh my gosh, these clients would get calls and calls and calls. So it's a good thing.

Speaker 1: 5:46

Yeah, absolutely Sounds like it. So is there anything that they can do before this trigger?

Speaker 2: 5:51

leads is passed. Yep, I will put the website in our chat. It's called Prescreen Opt-Out screen opt out and basically you can go in there and you can do an electronic opt out for five years for any lead based trigger. You know any lead based electronic lead based system that might pick up your information if you're on a website or whatever that is, and it'll opt you out of getting phone calls and things like that. Now, is it 100% effective? No, but it does catch most of them. So it won't necessarily catch every single solitary lead that comes from you visiting a Zillow website, for example, but it will capture most of the leads from a trigger lead standpoint and I always just encourage people to just sign up for it anyway if they don't want to have those leads, don't want to have that trigger stuff happen and be called out of the blue for something random. It does drastically reduce the amount and, unfortunately, the breakdown.

Speaker 2: 6:54

A lot of times what I see if people do get called not from a mortgage standpoint, but just in general, if that system doesn't work properly is when they have overseas call centers that are calling in for you know whatever they're trying to sell you or whatever that is. For some reason there's a break between that pre-screen opt-out and those overseas call centers, and so I don't know if they just don't have it worked into their system or it just the same rules don't apply because it's overseas or what it is. But that's when I see it doesn't work. But yeah, you can do that and then you can also. There are also is just getting your credit soft pulled instead of doing the hard pull and then also putting a, putting a freeze on your credit when it's not going to be pulled. Cause that kind of freezes, your information sharing too.

Speaker 1: 7:39

Okay, so I just wrote down soft hard, soft pull, hard pull and freeze on your credit. So can you just briefly explain each of those?

Speaker 2: 7:49

So a soft pull on your credit is basically just a think of it, as like, we get a glimpse of what your credit profile looks like.

Speaker 2: 7:57

So what it means is it's not a hard pull, it doesn't affect your credit score and it gives us a general outline of what your credit score will be and what your credit profile looks like. So what it means is it's not a hard pull, it doesn't affect your credit score and it gives us a general outline of what your credit score will be and what your liabilities are. We use those for pre-approvals, and we use those because we get two scores, not three, which makes it not a full pull on your credit. So because we use those two scores, we just use the lower of the two for pre-approval and then eventually, let's say, you get an accepted purchase agreement. That's when we do the hard pull. A hard pull has all three credit bureaus and does affect your credit score. From a mortgage standpoint, your credit score is affected two to three points and then it usually has a bounce back of 30 days and that's you know.

Speaker 1: 8:33

So there's a question too on that. So on the hard, pull two to three point. So is it kind of like within the industry? So let's say the buyer's shopping and they have you pull it, and then loan depot or someone calls and calls and calls and calls and convinces them and pulls it. Does that pull two to three points each time?

Speaker 2: 8:55

That's a great question. So, from a mortgage standpoint, you have up to 45 days to get your credit pulled for shopping purposes any amount of times, with it only affecting your score one time. So that's very important to note. Conversely, if you go to a car dealership you want to buy a car, you sit down with their finance person. They say, hey, we need to pull your credit. They're actually pulling your credit like 20 times, up to 20 times to send your credit information to different lenders to try to get a car loan for you. That can absolutely damage your score, because every single lender that pulls your credit in that situation damages your score. So I've seen credit point drops of 40 to 50 points just by going and shopping for a car. So it's important to note. I always recommend, when people go shopping for a car and this has nothing to do with mortgage but go to the bank, go to your local bank first and get approved for a car loan and then go buy your car, instead of the other way around. That's what I recommend.

Speaker 2: 9:51

Yes, definitely that, yeah, so you're already ready to go, especially if you're going to be purchasing Exactly, especially if you're going to be purchasing a house, yes, in the next year, I would say, you know, definitely do that.

Speaker 2: 10:04

So then the frozen credit.

Speaker 2: 10:05

So what freezing your credit does is it prevents anyone from pulling credit on you or having access to your data or anything of that nature, unless you give express written permission.

Speaker 2: 10:18

So what that means is if you say to me, hey, I want to get pre-proved, and I say great, awesome, and I attempt to pull your credit, it'll come back with the word frozen and basically you need then to go into Experian, transunion, equifax and say release my credit from this freeze for 24 hours. There's a 24-hour option, there's a three-day option and then there's an unlimited option. So what we tend to ask people to do who have frozen credit is release it for 24 hours, then lock it back up, and then the only thing that we'll need from you at the very end is to do what we call an LQI, which is where we do another tap into your credit to see if any new debt has been established during the time of from us starting the loan application, like from us doing the first full pull to the end of closing, so that we don't, so that we know if we've, you know, had any new inquiries resulting in any new debt.

Speaker 1: 11:14

Yeah. So on the freeze, why would someone freeze their credit? What situations do you see? I guess if you could talk more.

Speaker 2: 11:23

People who have been victims of identity theft will often freeze their credit People who lost a credit card, people who maybe just want an extra layer of protection against identity theft, people who, you know, like I said, have had some sort of credit event or some sort of credit card event, or whatever that is, that has affected their score, or that they are afraid that somebody found their credit card on the street because they lost it. You know, even though they've blocked the credit card and canceled it, they still want to make sure that they put that extra layer of protection so in there. And then they want to be in control of who sees their credit and to make sure that nobody that doesn't have permission can't pull their credit.

Speaker 1: 12:02

Yeah, how would a person go about freezing their credit?

Speaker 2: 12:05

Great question. So you can go to transunioncom, experiencecom and aquafaxcom and in the menu bars, you, in each of the menu bars, they will have a credit freeze option and you, just, you just request it to be frozen, and then you agree to the terms and conditions and it's frozen. Perfect, exactly, it's easy, just as easy to unfreeze it.

Speaker 1: 12:27

Perfect, yeah, no, that I love that. Other layers so that nothing can be happening behind the scenes without you knowing. So why not? Thank you? Yes, and I want to. I've jotted something down as we were talking because I was just like oh, purchasing a car while you're thinking about getting a house, don't do that. I got to go back and say something because that's our joke. But seriously, how many horror stories about someone that goes out and opens like a furniture credit card two days before closing because they want to get their furniture or car or something, and then and also don't sign up for any buy now, pay laters while you're in the process either do not sign up for any buy now, pay laters, those are considered credit debt and are going to start being reported to credit.

Speaker 2: 13:17

So just an FYI. So if you go on to Wayfair or wherever it is and you can buy now, pay later on this furniture, like you said, that is considered a line of credit now in the mortgage industry. So just know that if you have any buy now, pay later that show up on bank statements because they're going to start showing up on credit reports. But if they start showing up on bank statements, we have to answer for those and we have to take those into consideration. So the $6 a month, the $10 a month, the $20 a month, the $50 a month, those things add up very quickly and can affect your debt-to-income ratio. So if you're going to use the buy now, pay later system, please let us know and wait.

Speaker 1: 13:56

I just know that some lenders are not as good as you, and I've heard horror stories about them not understanding or knowing that they go and buy a car.

Speaker 2: 14:10

Yeah, I've had a client within the past six months Well, was it the past six months or past year? It doesn't really matter. Anyway, they were first-time homebuyers using down payment assistance to purchase a home and she had upwards of 17 different buy now, pay later's that we didn't find out about until we were verifying things later on, with bank statements on accounts that she was using for earnest money that we didn't verify until she had the earnest money done, because we didn't. You know, we gathered up the initial documents to verify. She had enough for down payment, but that was a different account. So she had upwards of like 17 buy now pay later that we had to work into her debt to income ratio, yeah, and we had to have her pay some off. We had to have her show us that they were at zero balance. We had to have her show that there were less than 10 payments on some of them so that we can exclude them from her debt to income ratio. It was a mess.

Speaker 1: 14:58

It sounds like it. Oh yes, buyer, beware on that. You'll see a big old spreadsheet on that one there.

Speaker 2: 15:13

So a lot of things happen in behind the scenes where it's like, man, you know that was my. That was honestly my first experience with buy now, pay laters, affecting mortgage, you know qualifying, but man, that was a. That was a giant one to to learn on.

Speaker 1: 15:24

And one other thing you mentioned, just cause I think it would be good for people listening that might not know the industry, the LQI, yes, where you pull it from, if you want to just explain that as well, yeah, so an LQI is just a limited query info.

Speaker 2: 15:39

So basically what we do is we go tap into your credit to see if you've had additional credit inquiries during the loan process. So from the date that we pull credit until closing, two to three days before closing, we can just see have you had any inquiries? So, have you signed up for that Kohl's card? Have you, you know, went bought a car? Have you done any other credit activity to get a discount at a department store? Whatever it is? We only can see that there was an inquiry. So then what we do is we come back to you and say, hey, there was this inquiry.

Speaker 2: 16:10

A lot of times it can be something like I was setting up utilities at the new place and they wanted a credit inquiry. Or I was at Kohl's doing the shopping and I wanted to get the discount. That's really what it is most of the time, because most people know not to take out new credit. But those small things kind of make big consequences. And if you really think about it, even that LQI process that we do it, we're allowed to do it up to three days before closing.

Speaker 2: 16:35

We do it three days before closing because if something happens, we need three days to get it through our system again. So just know that it can affect closing date. If you're going to go out and try to get new credit, you know it can affect closing date, because three days is not a lot of time for us to get a credit card statement for a card that maybe you opened last week. I mean there's not going to be nothing available. You know there's not a lot of time for us to get the documentation that we need or get it added to your debt to income ratio or get it added to your credit where we got to figure something out, and three days is not a lot of time, so it's just better to not.

Speaker 1: 17:10

Yes, wait till after closing and don't quit your job either.

Speaker 2: 17:16

By the way we verify that too.

Speaker 2: 17:18

That happens the day before closing or the day of closing, so we no longer have three days on that. So, just an FYI, that happens the day before or the day of. If it happens to somebody the day before, and we unfortunately will have to delay closing if we can't get ahold of your employer. So that's been a real big crackdown in the mortgage industry, as well as making sure people are actually employed. Yes, they used to give us up to like a week to verify employment before closing. Now it's it's day of, basically. Yeah.

Speaker 1: 17:46

That's amazing. Yes, and I had an agent that I was coaching that happened to her client and it literally they thought, cause it was like a day before or two before, they'd be fine. It was not fine.

Speaker 2: 17:57

Not fine, it's never fine.

Speaker 1: 17:59

No.

Speaker 2: 18:00

Also, the other thing is yeah, I mean, if you're getting a new job, please tell me as far in advance as possible.

Speaker 1: 18:08

Yeah. Cause we'll need to know that Nikki's like your BFF possible. Yeah, nikki's like your BFF.

Speaker 2: 18:13

So I want all the tea, spill all the tea to me. Okay, you know, and there is. You know, some things are a big deal and some things are not.

Speaker 1: 18:22

So it's better to just spill the tea. Yes, no, I love it. Awesome, Such great information today, as usual. Good education for even agents that are newer, some that probably haven't heard some of these terms or thought about it in a while, and anyone else listening to our podcast or us on YouTube. Be sure to subscribe and follow comment.

Speaker 1: 18:44

Let us know what you would like to hear, if anything, and we can also see that next week or in the weeks to come, because we are here every Monday giving you an update and going over great information like this. So, as always, nikki, I appreciate you and how you show up every week.

Speaker 2: 19:00

Absolutely, and I appreciate you guys and, yeah, I'm happy to do it.

Speaker 1: 19:04

All right. Well, till next week and again, Nikki, where do they find you if they want to follow your amazing content, what you're doing online?

Speaker 2: 19:11

Yep. So you can find me on TikTok at at mortgages from MN to AZ. You can find me on Instagram under the same handle and on Facebook under Nikki Erickson and or the Kevnick Mortgage.

Speaker 1: 19:22

Perfect, all right, till next week. Go sell something and have a good one, all right, bye everyone.