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did you know that a pre-approval can be very different from one mortgage broker to another mortgage broker wait what is a pre-approval well today we'll be diving into everything you need to know about mortgages so that when you're ready to pull the trigger and buy a home well you'll be ready [Music] being that the second most asked question as a realtor i get revolves around mortgages i thought that it would only be fitting to put together a little crash course to help you understand what a mortgage entails and everything you need to know about it like that when you're ready you'll have the proper information and today to help us get through that little crash course is none other than a frying pastel with art mortgage i'm really excited to have him on and kind of explain everything we need to know about mortgages fram tell everyone who you are give us a little intro about yourself when you got started in mortgages and um yeah i'm really excited to hear thanks for having me khan i really appreciate it um i started off in mortgages about two and a half years ago i work for arc mortgage which is a licensed mortgage banker in new york and new jersey and i've been doing this for the past two and a half years and i've you know gained a lot of invaluable experience just working with different clients different houses and being able to provide for them the financing that they need awesome that's amazing i really appreciate you being here and let's kind of jump right into it let's start from the beginning somebody decides that they're living in an apartment it's too small and they would like to you know go ahead and purchase a home that's bigger and you know really take that next step in life so let's really start at the beginning when somebody comes to me um and he did not go to a mortgage broker before he came to me which is the wrong thing first you want to know how much you can qualify for before you start looking at houses i would tell them you know speak to a mortgage broker like that or you know a mortgage banker slash mortgage broker like that you could know where you stand um how much what house range to be looking at and you know where you stand so with that being said there's two different factors that as a realtor plays a role when i'm working with clients so one is how much they can afford and two is how much they can qualify for i know that there is a huge difference between the two but can you explain why and how there's a difference between how much i can afford and how much i can qualify for really i'm glad that you highlighted that because it is a very significant difference between being able to afford a house and being able to qualify for a house and when we talk about being able to afford a house it means that you've sat down and looked through your monthly budget how much you're spending on your monthly debt obligations overall paying for cars if you're paying for tuition if you're paying for groceries everything that you're paying for also of course paying for your current housing and determining based on that monthly figure how much more you feel comfortable being being able to put out take out of your pocket on a monthly basis now um this is something that i do i try and do this from the onset with people because there is a difference between qualifying and affordable right i you know i work through a budget worksheet with them and you know we figure out how much they're spending on each type of category and how much more they feel comfortable paying per month for out of pocket for their uh for for their housing and once we have that number we kind of try and translate that to being able to qualify for that same number so if someone and and and there's a difference because someone who can who can afford something might not necessarily qualify for it and someone who can qualify might not necessarily be able to afford someone might be making a significant amount of money and the bank will see that his monthly debt obligations are not as much as what he has on his budget worksheet and they're going to say well you're qualified for this this this and this amount of money but he knows in reality that although he's qualified the bank will lend him that money he cannot afford the monthly payment that that mortgage that they're qualifying for him for is going to entail he simply can't do it so what we're going to try and do in that case is say okay according to what you can afford this is the uh price range that you should be shopping in because this is how this is how the mortgage is going to look when you go and try and buy such a house and and on the on the flip side you can have someone who can definitely afford something because he has various income streams that we might not be able to use to qualify there are a lot of different factors that can go into that maybe he hasn't been at a certain job for a long long enough time so i'm not using that to qualify maybe he maybe he's self-employed but it's a cash business so i don't see the money go you know on on the documents that i need so the bank is going to turn around and say you're only qualified according to what we see you're only qualified for for x amount of money but he'll tell me but prime i'm i can afford much more look at my bank accounts you see how much money is coming in and i will tell them this and i feel i feel very bad but this is the only way that i this we can only do it according to what the documentation says but at the same time it's important for him at least having gone through the motions of gone of mapping out a budget and figuring out how much he can actually afford at the very least he knows going forward if he has some way to make his documentation better that he will be able to afford that larger mortgage that the bank didn't initially want to qualify him for right so what you're saying is that there's two things that we need to be looking at over here there is affording something have it on a budget sheet that you like to go over with your clients what it is that they're paying on a monthly basis so that would be their rent their car their groceries their tuitions whatever it may be and that subtotal number that's what he's paying on a month-to-month basis and then there's something qualifying for the bank looks at what's your income and based on your income and the other things that play a role in qualifying for a mortgage those numbers can be extremely different right so it's so important to actually know what is my monthly budget that i'm paying and how much more comfortable am i how comfortable am i paying a certain amount out of pocket in addition to what i'm paying right now for the mortgage and then there's qualifying for it right so the bank looks at a very narrow financial picture they look at tax returns they look at pay stubs if you're earning a wage they look at your credit report and whatever monthly debt obligations appear on the credit report they do not look like things like tuition they do not look at things like you know if you've committed to giving a certain amount of money per month to a certain charity they don't look at anything that doesn't appear on your credit report and that's why the budget and the and and what the pre-approval says might be very very very different and and so it's important to get a pre-approval but it's equally as important to have a budget sheet and have an advisor who can show you what you can afford and what and what you can qualify for both all right so that's so important i really appreciate that um okay great so the next question really is more about for my own you know curiosity and also for people that want to buy a house as a realtor people you know call me about a house that they see advertisers you know for sale sign they see and my first question is did you speak to a mortgage broker do you have a pre-approval which is what we just discussed and the first thing i kind of get their response from when i say the word mortgage or pre-approval is it's just like a hassle it's like uh no i didn't get around to it or no i didn't or i plan on so my question to you really is the word mortgage comes off as to people as a hassle like what really in what's entailed in a mortgage what makes it so difficult and kind of you know what's the process so the initial process the pre-approval stage if you will is actually not as big of a hassle as people may think it's more once you found a house and then kind of waiting around and getting updates that's what people think of as a hassle so let's break it down in the pre-approval stage if someone comes to me and they're looking at a house i'll say all right here's the list of documents that i need typically i just send them an email with i need your income documents i need your your your identification documents i need your personal information so i can make a check make a credit check for you all that together i put all that together and say according to the documentation you provided for me um and according to the credit report this is what you should be qualified to borrow now it's not precise because we have to qualify them as if they're paying a certain amount of taxes on the property that they want to buy we don't know exactly which property necessarily they are buying yet so a general pre-approval might just have an amount on there that is representative of the area that they're looking in but not necessarily a specific house if someone's ready to make an offer i expect them to call me back or i'll follow up with them and i'll ask them so you do you want to put an offer on the in on this house and if they say yes i'll go and do a public record search to see how much the taxes is and factor that into the pre-approval and say okay you'll be good applying for a mortgage for this house that's the beginning stage there's really not a lot of fancy leg work going on in it it's just you give me documents i give you back a pre-approval that's very very easy because it's just me as the bank and the borrower it's just two people right it's straight up numbers it's just straight-up numbers okay now once i once someone puts in an offer they get an accepted offer and they've gone through all the inspections and all the all the you know the pre-contract stuff that needs to be done then the real process starts so then we have the application and we have the underwriting which means the bank is checking your you know how risky you are as a borrower how likely you are to be able to repay the mortgage and that part is where people kind of get start to get frustrated because we have all the documentation already so what are we waiting for how come it's taking so long so let's break it break that stage down besides the borrower applying for the mortgage to the bank which is him talking to me and me you know delivering that file to our underwriting department and then checking through his qualifications we also need a few other different things to to kind of line up it's a very big puzzle you have the property in question we need to make sure that property is worth what you're paying for it that's when we do something called an appraisal and it can be a lengthy process you need to find someone who's certified as an appraiser to go down he needs to compile the report based on other properties that have sold in the area and it could take a long time and and and you know depending on how busy a given appraiser is it could take a very long time i've had i've had some that have taken three or four weeks and it gets very frustrating not just for the customer it gets frustrating for me i want i know that this borrower is qualified and i more or less know that the property is worth what it is also but everything has its time when it needs to you know when it needs to happen and there's certain things that need to be done in order for the full process to come to completion besides evaluating the property we need to make sure that the person selling the property is the rightful owner and that's we do something called a title search we go to a title company some of the famous ones shout out to riverside madison title is another very famous one and what they do they have a whole office of people who are doing searches on public records to make sure that the house has been transferred the property has been transferred from one person to another with no claimants in between that can say oh we own the property and this person doesn't have the right to sell it that's that can also take time because that's another third party company that has to do a process and certify that the title that that this the person who's selling the property is the is the person who has the right to sell it and then you know if when you're buying a house of course there's a seller and there's the seller's representatives the seller's real estate agent the seller's lawyer and you know they can make various not issues but they have their own agenda and their own schedule of how they want things to get done and if we need certain pieces of information from them that can also take time so everything together not necessarily a hassle so much as you can get impatient thinking that things are done when they're actually not done yet because there's other entities that have to do their part so it's important to remember that when you go into a mortgage it may seem like it's taking longer than it should have but you always should be able to feel comfortable asking your loan officer where things are coming up where you know if there's are there major road bumps is are we just waiting for things where are things holding and that's something i always try to provide for people and manage their expectations from the onset don't expect that it's going to take a week it's not buying you're not buying a car you're not not even a car and a car you also get financing on this takes much longer three weeks four weeks is generally what i like to tell my borrowers and it can take longer depending on the full scenario right okay okay so yeah that makes sense so just to really break it down in terms of step like steps of the process so first you would have the pre-approval right which i really want to come back to that just to ask you a question on that the second part once we get the accepted offer and we start the mortgage process there's something called a mortgage commitment that comes from the bank that is essentially the bank telling you that we reviewed the docs reviewed the numbers reviewed the house in detail you you are you know we're giving you a commitment that you should be able to close in the house no problem right that would be a commitment so that would be the commitment and it's important to remember people think that the work commitment is that's it okay come on the bank's gonna land what else are we waiting for right so it's important to remember that most commitments are conditional that means that the bank has checked out most of the situation and said according to what we've checked out this person is qualified to borrow we're willing to lend to this person according to the qualifications that we've reviewed but they may add conditions to that that say well this minor issue needs to be taken care of or we need this piece of documentation is missing we need some things to do fill out to fill out the um to fill it out it's not so much that they're missing information the information has been evaluated they just want to um they want to support that information a little bit more in some cases and it could be stuff that has nothing to do with the borrower or it could be something the the appraiser didn't mention that there was a there that the there's a power line running through the property and that might affect the value there could be any it could be anything and each bank generally will try and you know stick to not not not necessarily being strict but they want to they want to make sure at the end of the day they're lending money um pretty much most of the house right exactly so that that's so that you have the commitment now before the commitment we have the appraisal right that's right so right so in new jersey specifically in new york it's not the case but in new jersey um the bank will never issue a commitment before the app aisal is in i assume it's a law thing that's not something i ever looked into i just know that there's a difference and so a commitment will never be issued before um before the appraisal has come in and we know that the value is good and that the uh that the appraisal is good because there can be mistakes on the appraisal too everything has to be it's a very precise puzzle that that's being put together so the commitment could be delayed due to the appraisal absolutely we get the appraisal we get the commitment once the commitment is done where we the title search is typically something that's ordered by the attorney yes yes on the purchase it's ordered by the attorney and what process is that at what stage is that done so what we try to do especially now that um the mortgage industry has become a lot busier because rates are great everyone's trying to get financing and because of that all the third-party providers are also very busy besides the banks being busy the title companies are busy the appraisers are busy the homeowners insurance brokers are even busy everybody's busy so what we try and do is basically gather everything up front that will be necessary to get not not a conditional commitment an unconditional commitment where everything has already is already ready to be reviewed by the time it hits the underwriter's desk um sometimes we're not in control of it obviously things can happen if you're buying a house and it turns out there's some sort of environmental issue that can delay not only can delay the appraisal it can delay the title it can delay you know the lawyer might tell his client you know something i don't think you should let's hold off we're not going to do anything don't pay for anything before we figure out whatever this issue is but um what what we try and do is get everything together and send it all to the underwriter so that when they return the file to us with a commitment that's completely unconditional because there's so much volume going on we're trying to get everything done so the title um would also be done prior to getting that commitment and what so again once we have that commitment what is the last step or the steps um after that that we need that we need to clear to close and we're good to go so after we after the commitment is issued conditional or not we're going to go back and gather whatever is necessary to clear the conditions once we do that you send we send it back to underwriter undereye says okay conditions are cleared you have a final approval final approval is not the same thing as a clear to close it just means that the conditions on the commitment have been taken care of once once that is done we send the file to what's called quality assurance we want to make sure for the borrower's sake that something doesn't pop up at the closing table when we're all in the middle of signing all of a sudden oh we forgot this document and we need to stop everything that is the worst it's worse than not being qualified in the first place it's in reach and then all of a sudden no we have to wait till another day that's a terrible feeling and in order to avoid that what we do we do a quality assurance check after the underwriting to make sure that absolutely everything we need is ready once that's issued we have a clear to close and then you just go ahead and schedule the closing awesome awesome okay great so yeah so i just really want to go back uh quickly on a pre-approval for the people that are watching what and what do you look at when you're issuing a pre-approval what are the you know how however many things you look at what what are those things right so what i look at i'm doing income evaluation based on documentation not based on what the borrower told me and i'm looking at his credit score and when i have all that stuff together i can put i can input the information into my system i can run something called aus which is a technical term it stands for automated underwriting system all it means is that i have a program that will tell me based on the information that i put in if this scenario will be approved or not that's all it means it sounds very scary and it's underwriting oh i don't want anyone looking at myself it's an automated system right it's an automated system no one is looking at it besides me and that is what my pre-approvals are based on i do not eyeball it and say well according to what i see here it should be good no i'm only doing very precise it's very precise and and it's important to to it goes both ways it's precise that's for the borrower's benefit because he knows according to this scenario according to what he gave me that he's approved but it's also the opposite way if something is not true or if something changes then you can't write you can't beat the system exactly it's based on the documentation the documentation doesn't support the information i put in and i can make mistakes too i try not to but if the documentation does not support what we've put in then there's simply not the same scenario and they may not be approved they might be still approved but they might not be so the two things that you need to issue a pre-approval would be the income right income income documentation income documentation which means it can mean assets if somebody has investments that they can use to you know you know use as uh income for the house so anything that is bringing you income based on a month to month that's what you look at exactly and then credit score so my question to you is a lot of people that let's say miss a car payment or you know they have a late car payment or a late credit card it could really affect our credit score so how important is a credit score when issuing a pre-approval so the credit score in of itself is very it's very interesting people think ah credit job this is a credit decision they're lending me money that's like borrowing on credit um if my credit score is not good i'm just not gonna be i'm not even gonna try this is a big mistake because there are different programs out there that will allow someone with a not great credit score to still be approved and maybe even have a very affordable mortgage some some people who have a little bit more knowledge will say well i know that the credit score affects my interest rate my interest rate's going to be too high i don't want to get into it it's too much i don't want to i don't want to think about it this is this is it's the wrong it's the wrong way to approach it frankly um like like we mentioned before that automated underwriting system is going to be the deciding factor you could have a 680 credit score you could have a 640 credit score so that's a good thing and you can have you can have a 700 credit score and the 700 credit score will not get approved and the 680 and the 640 will i had someone who was looking to buy an investment property in new york and haverstraw somewhere and they had had you know various frauds had happened on their on their name their social security number had been stolen we worked through all that we got their credit score up to 708 and the automated underwrite systems still did not want to approve them because it's not just the credit score it's the combination of all the risk factors involved someone's going to be putting down a small amount of money and their credit score is not so great and they're they're the proportion of their income to their debt on a monthly basis is a little bit too high even if their credit score is quote unquote good it's a seven you know it's over 700 that's it's not the perfect but it's good they still didn't get it approved what is the ideal credit score how does it work what's the what's the tiers that people can be in um and what's the best you know what can someone still get approved for sure so let's start from the top from the top and work our way down for most mortgages 748 credit score and above is going to be the best that you can get that means you're going to get the most favorable interest rates you're the most likely to be approved according to the underwriting system and 740 is where it's at people tell me well i have 833 credit scores like that's great that means you're creating your credit really clean but for a mortgage it doesn't matter it may matter for other stuff i don't know um but for mortgages 740 and above um for most for most mortgages right um the next tier and it goes in in series of 20 so you have from 720 to 739 is the next best you're still going to get pretty good interest rates for the most part you're still pretty pretty much guaranteed to be approved and and you know there might be a slight difference to the rate depending on the scenario and then underneath that you have from 700 to 719 that's the next year that's basically the last tier of credit that would say is virtually guaranteed to get a to get automated approval but as you know depending on the other risks that may be involved in the in the specific file you might you might not get approved it's already kind of like the yellow zone if you will under 700 you go from 680 to 699 and this is already the kind of shaky territory that you get in ideally someone who's in the higher end of that of that spectrum should try and get his score above 700 so that he improves his chances of being approved but i've definitely gotten people mortgages that had under 700 credit score the other thing that it can affect if you have under 700 credit score is if someone putting down less than 20 pays something called mortgage insurance which is not something really discussed we really discussed but it it's essentially harder to get approved for the mortgage insurance aspect if you're have if you have under 700 credit score and if you do get approved it still might be very expensive it might might be worthwhile looking into some other options or getting your credit score up um the next the next the next tier underneath that is from 660 to 679 again we're just going more into downwards territory it's ideal if you know that your credit score is in that range and you want to buy a house work either with a mortgage bro you know a mortgage professional can help you can help guide you a little bit in in how you can improve your credit score we can run a simulation to see what things on your credit report are bringing your score down and barring that you would have to go to a credit repair professional if there's something really serious going on so that you can get everything cleaned so that you'll be ready to buy the house when the time comes under 666 the 640 tier and again same pretty essentially not really a difference between 660 and 640 maybe in the rate sometimes but also just less likely to be approved and then the last tier is from 620 to 639 that's that's the bottom that's that's the bottom of the pack as far as the conventional mortgage is concerned underneath 620 you will not get automated approval for a conventional mortgage there is other programs for people who don't have a good credit score six between 580 and 620 um there are fha this puts something called fha it's essentially a government-backed program that helps people who are in a in certain scenarios it can be a very beneficial program for them especially if they have a low credit score and if they have a low credit score sorry so fha is not ideal unless you only fit the mold i have a lot of times people coming to me they're saying i'm a first time buyer i want fha and i because i know these you know the process fha is not beneficial unless you're in a very specific category making you also have to fit in a income a bracket if you're making a certain amount you will not be approved for fha is that correct no that is actually not correct fha is not limited by income at all um it's not there's no income calculation there's no ceiling for how much you can make and be qualified for fha what fha does is for the those the the top two brackets that we talked about in under 700. between 660 and 699 um those are probably the two brackets for credit that are going to be uh that are going to benefit the most from fha because the mortgage insurance if someone especially if someone wants to put down a low down payment fha allows you to put down as little as three and a half percent and the mortgage insurance is going to be cheaper in those credit scores brackets than going for a conventional mortgage with putting putting down the minimum on such a loan there's a lot of technical stuff in there right and you know someone if anyone has any questions feel free to call me and we can discuss your scenario so we can figure out exactly where you fit but there is an option out there for people who want to put down less and don't necess don't make as don't make as much money the fha ratios for income and debt are higher than conventional mortgages gives you more so it gives you a lot more flexibility income wise as well yeah so with that being said every person has a different uh income amount a different story it's not a one size fits all so if you think that you can't you'd be surprised that you could um reach out to a mortgage broker mortgage professional to help you with that process to know really what you can what you can't with that being said that that's a great question that i have right now for you which is if somebody gets declined by a bank right let's say he applied for a bank and they rejected him is it possible for him to get accepted by another bank and if so what should he do in that scenario so it's it's a very interesting question because for me as a as a as a mortgage banker what i do is i help my company lend our own money we're lending we're lending directly from us to the consumer we're not like a middleman we're taking the file shopping it around to a bunch of different banks and figuring out where the consumer fits and because of that i whenever i put a file in whenever i take an application from a borrower i am not necessarily a hundred percent confident but 98 to 99 confident that this file will get approved i don't think i've ever had a file on its face that got rejected from my underwriting department sometimes things change and then that can change the entire scenario obviously but when someone puts in a mortgage application from the beginning and it stays the same i i have a hundred percent success rate whereas right so where would how would that differ from someone else so you're a mortgage banker right then there's something called a mortgage broker right so what a mortgage broker is doing is essentially and again i'm not broker so this is just my perspective i don't you know brokers can feel free to argue with me and explain how we're exactly the same but in my perspective a broker essentially takes a whole file which is what i do we do all that the same but then instead of sending it to their underwriting department they have to go figure out according to the scenario what bank in their roster of wholesale banks does this does this file make the most sense for which one is he most likely to get approved by so it's a little bit more of an imprecise uh science if you will because it's very hard to say from for 100 confidence beforehand that oh yeah you're going to get approved you don't know which bank you're going to yet it's it's ver it's a very in my mind for the consumer i think it would be very very different experience so the key the key being that when i send in the file it's going to my underwriter they're in the next room and there's a issue they don't reject the file they ask what's to get it they ask what's going on maybe this is not as clear as you meant it to be is this real do we figure this out this looks like if we tweak it this way this will make more sense they're working together with me to get the file done where a wholesaler is not really working with the broker as much as they you know they make money from them obviously but they're looking they're kind of on their own their own camp if you will where we're we're working all together to get the file approved got it so yeah so it's really so what you're saying is that there's a mortgage broker mortgage banker a mortgage banker because they're a banker and they're the ones lending you the money you have more flexibility with the underwriting rocess because you you know like you said they're sitting in the next room i can have a conversation exactly whereas when it's a mortgage broker giving it out to a bank it's a they could be more strict they can be more you know easy to say no right and and the truth and the truth is especially now now when um rates are really good the banks you know everybody's trying to get financing right now and the banks have their pick of their lot they don't need to choose you know the you know more risky bowers or borrowers that will entail more work on their end they'll just reject them and take the easy low-hanging fruit but as a direct lender we take all comers because we have the expertise necessary it's not a bigger hassle for us if someone has 15 businesses that's giving that that are bringing them income or if they have just a simple w you know just simple wages that they're that they're earning on a monthly basis it's all the same for us and we're looking to approve people and we're looking to lend out the money and and it's just a much easier time than than than going somewhere else so that's really the key difference between a mortgage banker and mortgage broker which is very interesting most people don't know the difference they use the word the the term interchangeable between mortgage broker mortgage banker um great now the next question is really probably the most asked question as a realtor that i get i'm sure it's the most you get as a mortgage banker how much cash do i actually need to buy a house i have in my savings x amount of money let's say twenty thousand dollars what can i afford with that what what do i need what's involved how much cash do i need in my bank account to be able to purchase a home all right so yeah this is definitely a question i get asked as well because because it's you know it used to have right well yeah because people i mean it's the number one concern on their minds is do i have enough saved up to be able to actually do this and and it's interesting because people used to think and i was the same way before i bought a house i said 20 you need 20 and you know and that is you know in 20 down payment yeah 20 down payment you know the money that has to come from me for the for the sales price 20 of that and that seems very insurmountable for most people especially in our areas where the real estate prices are extremely high um and you know i never thought that i would be able to buy a house either and that i discovered that there's many ways that you can buy a house with very very little down so the first thing to discuss would be how much down payment do i need to give now on a conventional loan you can put down depending on your income how it looks three percent or five percent depending on the income and and that even though you know it's hard to just quantify that in a in without having a specific scenario it's it's really not a lot of money so let's say five hundred thousand dollars five percent that's how much so if twenty percent is a hundred thousand dollars so one quarter of that would be 25 000 and that's it 25 000 for a 500 for 500 000 that's a big house so that is the down payment you need twenty five thousand dollars minimum just to start you could do sometimes three percent and sometimes you could do three percent so it would be a little bit less than that right now so that's that's twenty five thousand dollars that we have to start with for the down payment now what what else do i need any more cash that's always the follow-up question the answer is yes and and you know i tell them that it's uh you know you're gonna need another twenty thousand dollars and they're they give me a look like what do i need what else i mean the house is this and you told me five percent so where's this money going to so we discussed earlier that there's a lot of people performing services in um in connection with the loan we have the appraiser we have the title company um so all those people don't get paid until the loan closes and that's what we call closing costs closing costs um people usually say it's between two and three percent of the of the of the total of the uh the purchase price it's not really that precise but if you break it down the money goes to a few different places the bank generally charges a fee to process the mortgage um usually the industry average is like fifteen hundred dollars and that goes to the bank that's the only money that actually goes directly to the bank nothing else will unless you're paying for discount points which is a different discussion that's too confusing for now yeah but that's the bank's fee fifteen hundred every average on average everything else is going to other places that are doing work for you so that you can buy this house in connection with getting the mortgage that's the title company that's the appraising company the appraiser and and your lawyer and the big one of course uncle sam and the local governments as well who are going to collect certain taxes from you when you buy a house now in new york which is not where we are right now we're in new jersey and you're obviously only licensed in new jersey so we'll leave new york on the side in jersey taxes are collected property taxes are collected um every quarter quarterly so let's say you have a 8 000 tax bill for the year which would be i don't know if that's on the high end of the low end but right that's a little bit on the lower end the average is about 10 000. okay so let's say 8 000 because it's easier for me than that short head sure so every quarter you're going to pay 2 000 of taxes to your local governments this between state and town and village and however it's divided up it's 2 000 per month per quarter sorry now uh the rule is when you're buying a house when the house is transferring from one place to from one person to another you have to pay the next tax period that is due you have to pay it up front as long as it's within 60 days and i'll explain what i mean if you're closing in march right so that the the your the next taxes that is due is going to be due in april 1st it's the beginning of the next quarter you have to pay that 2 000 up front at closing right so that's two thousand dollars right there that you're going to be collected doesn't go to someone who gave you a service that goes to the government right but that's still part of your closing code and i say costs because it's a cost because you're not paying for a service you're paying for owning the house and you would pay that money anyways it has nothing to do with actually getting the mortgage if you own a house you pay taxes so and all those things can add up together and you usually end up between 10 and 15 000 for the money that you need to have available to use at closing and then depending on the scenario you might need uh reserves which is money that you don't use but you need to have it available because that's part of the requirement for qualifying but that's uh that's not really cash that you need but that's that's kind of a simplified breakdown if you will of of how closing costs work um and at a general level sometimes it can be outliers you might have to pay open taxes but that's for another time so the average closing cost in the state of new jersey um on a single family home is between ten and fifteen thousand dollars um and that's why you said you need an additional twenty thousand because there's always things that are going to come up and you do not wanna draw yourself out to the point where if something happens you don't have it exactly so it's a good it's a good thing that you that you emphasize that it's there's two questions how much do i am i required to have that's closing costs and down payment how much should you have you should have more than that because you're going to be moving in i don't know if you need buy furniture you need to paint you need a screen you need a mover mover everything costs money you're gonna get you there's there's so much that under that's unexpected that you should have um some money set aside for that and besides that what i always do as part of the initial when we're discussing initially the budget and and figuring out their monthly budget i also want to make sure that they have an emergency fund because who knows how long this process takes you don't want to pour all your money into a down payment then have nothing left over for something in the interim that happens you know anything you know god forbid anything happens maybe you need to pay for a car repair you always need to want to have you always don't take all of your savings and say oh i have twenty five thousand dollars right this is my down payment you wanna have more available adjusting just in case if something breaks in the house down the line you're a owner right now and you're responsible you can't just call your landlord and say that's something broken exactly um so yeah so yeah that pretty much is a little bit of a breakdown um okay guys so there you have it a little bit of a breakdown it was not in length obviously is a little bit longer than we anticipated we wanted to really make it short but with that being said this is a breakdown of the mortgage process so when you're actually ready to go ahead and pull the trigger and you know start looking at homes you have the information you have the tools what to expect going into the process um again i want to thank ryan for coming out here i really appreciate it um we're gonna link his you know information in the description if you guys want you can reach out to me for it um yeah that's the breakdown thank you so much for watching and we'll see you next time [Music] [Music]