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Episode 256 - The TikTok Mortgage Guru: Chadd Johnson's Advice for Home Buyers

Navigating the mortgage process can be daunting, whether you're a first-time homebuyer or looking to refinance your current mortgage. Today, Brad Nelson, the founder of Debt Free Dad, hosts an enlightening podcast episode featuring Chadd Johnson from NFM Lending. The conversation covers critical aspects of the mortgage industry, offering invaluable insights and practical tips for potential homebuyers. This blog post encapsulates the key takeaways from their discussion.  

 

Meet Chad Johnson 

Chadd Johnson is a mortgage lender active on TikTok, under the handle https://www.tiktok.com/@chaddjohnsonkc  Known for his engaging and informative content, Chadd uses the platform to demystify the mortgage process and educate first-time homebuyers. He has been in the loan industry for nine years and leverages TikTok to break through industry gatekeeping, making mortgage knowledge accessible and fun.  

Understanding the Basics 

Brad and Chadd start the discussion by debunking a common misconception: the stress involved in buying a home. According to Chadd, the mortgage process is significantly less stressful when broken down into manageable parts. The key areas of focus are income, assets, and credit. Here's a breakdown of each area:  

  1.  Income - Loan eligibility often depends on income, which isn't always straightforward. - Chadd emphasized the importance of job stability, ideally being at your job for six months to a year. - Variability in income, such as tips and commissions, might require more extended periods of stable employment.  
  2.  Assets - Assets refer to the money available for down payment, closing costs, and reserves. - First-time homebuyer loans often require only 3-5% down. - Gift money and 401(k) funds can also be utilized.  
  3.  Credit - Credit scores play a crucial role in determining loan eligibility. - FHA loans can go as low as a 580 credit score, but the aim should be 640 for better terms. - Conventional loans typically require a score of 700 or more.  

When to Talk to a Lender 

One of the most important steps in the home-buying process is consulting with a mortgage lender early. According to Chadd, the best time to start this conversation is about 12 months before you plan to buy. This allows ample time to correct any credit issues or adjust income records.  

Types of Loans 

Understanding the different types of loans can empower homebuyers to make informed decisions. Chadd breaks down the four primary loan programs:  

  1.  Conventional Loans - Suitable for individuals with higher credit scores and larger down payments.  
  2.  FHA Loans - Ideal for first-time homebuyers and those with lower credit scores. Provides leniency with debt-to-income ratios.  
  3.   VA Loans - Available to veterans and active-duty military personnel.  
  4.  USDA Loans - Designed for rural property buyers. These core loan types can be further customized with additional features, but understanding the basics can simplify the choice significantly.  

Common Roadblocks 

Chadd highlighted the major obstacles that potential homebuyers face, primarily due to debt-to-income ratios. Car payments and other installment loans often cause hiccups. Although student loans are less of an issue now due to income-based repayment plans, fluctuating incomes can still complicate the approval process.  

Do's and Don'ts During the Mortgage Process 

Navigating through the mortgage process requires careful planning and strategic actions:  

**Do:** Keep credit card balances low throughout the month to maintain a high credit score.  

**Do:** Consult your lender before making any job changes that might affect income consistency.  

**Don't:** Acquire new debts, like car loans, which could jeopardize mortgage approval. 

Realistic Expectations 

Given the current market conditions, prepare to face higher home insurance premiums and elevated property taxes. The key is to remain disciplined with your budget and realistic about what you can afford.  

Conclusion 

Buying a home can be overwhelming, but being well-informed can ease the process. Brad and Chadd's engaging discussion offers a treasure trove of advice, from understanding types of loans to recognizing common pitfalls. As Chad concluded, working with a knowledgeable mortgage advisor can transform an intimidating process into a manageable journey. If you need more personalized advice, find Chad on TikTok at https://www.tiktok.com/@chaddjohnsonkc , and connect through his link tree for further consultation. To catch the complete conversation and gain even more insights, be sure to listen to the Debt Free Dad podcast. 

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