100th Episode Special: My First Home Loan Story!

Mike MIlls (00:00:08) - What's up everybody. And welcome to Texas Real Estate and Finance Podcast. I'm your host, Mike Mills, a local mortgage banker here in Dallas-Fort worth. And this is your market update, I guess you would call it. Um, we're gonna do things a little bit differently today. So usually I bring you news and stories from around real estate. But today I want to try something a little bit different. This is actually my 100th episode. So I've been doing this a little bit over a year. And, um, I had a big plan for what I wanted to do for this episode, um, involving some people that have been with me on previous episodes, right in the very beginning that have been regular contributors and kind of bring them all in and have a big roundtable conversation. And, you know, sometimes things just don't work out scheduling wise. And I'm a huge procrastinator, so that certainly didn't help out the situation. But here we are. So I wanted to try something a little bit different for this hundredth episode.

Mike MIlls (00:00:53) - I've been kicking around an idea for the last couple of weeks about doing more storytelling, because in the world of real estate, you know, really and truly what we are is we are here to help people achieve a dream, right? A dream of owning a home. And those human beings have stories. They come with stories. And so I wanted to share a story that I've had for a number of years, since the beginning of my career. Um, about the one of the very first loans I did. It's really an interesting situation on how it all went down, and seeing that this is a real estate and finance podcast, I thought it would be good to share a real estate story. So, um, please indulge me for a little bit. Um, I think that you will find this relatively entertaining, and it doesn't quite end exactly the way you might think. So stick around to the end and I think you might be surprised. So I hope you like it. And if you do, please let me know.

Mike MIlls (00:01:39) - I really want to do more of these story type episodes in the future, so if you enjoy this, I really want to show the human side of what we do every single day and finding out stories about people and what they go through when they're trying to buy a house, good or bad, I think really helps drive the point home of what we're doing is is important, why it's so integral to how this country works. So back at the very beginning of my career, I had a guy call me up to apply for a mortgage. Um, let's call this guy Tom just to not reveal anybody's name. So Tom at the time wanted to buy a house with his girlfriend. They were planning on getting married at some point, but they were just tired of renting their not so great apartment in a not so great part of town. And at the time, he'd heard how easy it was to get a mortgage. Now, this was prior to the Great Recession. So we were in the wild, wild west of mortgages back then so things could be done, um, a little bit different than they were done today.

Mike MIlls (00:02:24) - Now, since this was one of my very first applications, I was super excited and very interested in helping out any way I can because at this point I'm a big banker doing loans now, right? So kind of a big deal. So Tom called me up and we did the application over the phone. At that time we didn't really have like apps and stuff we would send out, you know, they would just basically fill it out over the phone. You could send them a piece of paper I think they could print off and send back to you. But at that point, at least most of the time, we were doing stuff over the phone. And before I even pulled his credit, I wanted to make sure I had a complete application because that's one of the points they drive home at you when you're doing your training is be sure that the application is complete and you have all the information that you need to make sure that you can, you know, have a good loan. So I wanted to make sure I had good notes, and he had told me in the beginning that he thought his credit was pretty good.

Mike MIlls (00:03:04) - I didn't ask, but he kind of told me that. So first we started with his employment, so he told me he had several other jobs in the past, but had just started a new career and was making pretty good money. And with the, you know, good opportunity to make a lot more money down the line. So sounded promising. Now, what I didn't know was that he had just recently opened a restaurant with a business partner that he was a part owner of, but he said that he paid himself a salary of $40,000 a year, and that at the end of the year that when the company had a lot of profit, that he and his partner would be paid out in dividends, and so he would have even more money at that point. So in my naive mind, I'm super excited because this guy obviously has money because he just opened a restaurant and he's being paid a salary. So he gets like an actual income. It's not like bonuses or commission. Again, very naive, but I had heard in training that if people were self-employed that they usually needed like two years history to count their income.

Mike MIlls (00:03:55) - But he was getting salary. So I thought at least for that part, it should be okay, I thought, but of course I wanted to be sure. So I asked if he had worked in restaurants before, so maybe I could like connect his previous work history. So Tom told me that he had bartended all the way through college, but it took him about seven years to graduate because he, like, took two years off and lived in Florida. And actually, he said he got a job working on a cruise ship as a bartender, like he was on the Love Boat or something, which I thought was really, really cool at the time. So I asked him a ton of questions about it, and he had some really crazy stories. But that's for another podcast. If you ever want to hear those, just let me know. But he said when he got back after the cruise ship that he kept on bartending while he finished school, he told me that for about three years that he went to school three days a week.

Mike MIlls (00:04:32) - He worked full time. He was running a swim school for kids, teaching little kids how to swim and managing teachers and whatnot, and then he bartended on the weekends. So like at one point for about 2 or 3 years, he was working like three jobs. So in my mind, I thought this was great. This guy's working. Um, and he was he had been in the restaurant business for most of his life, so maybe that would help the fact that he didn't have the full two years because you kind of hear stuff like that, that maybe that helps out a little bit, but you never really know. So I'm just taking good notes. But the problem was, is in between all of that, he had actually left. All that stuff and went to go work from RadioShack. After he graduated. He got a stable job there, but he was only there for like a year and a half or so, and he was only making about $27,000 a year. So even though he was working at the corporate office, he was still not making a ton of money.

Mike MIlls (00:05:12) - He was actually making more money in the other jobs. And he was for that one. But, you know, they kind of tell you, go to college, get a good job and then start your career. So that's what he did, which kind of hurt him because then he didn't have a consistent restaurant history. And that was primary reason why he left RadioShack and went to open the restaurant, because he thought that he can make more money because he wasn't doing what he thought he could do at RadioShack. So I'm trying to piece together all the employment, and I thought maybe if I had all of the information that I could sell the underwriter, that in the short time at least, that even though he's been employed for a short amount of time, that because of all his restaurant experience, we could connect those two. And I didn't have to follow that two year thing. And again, he was getting a salary of 40,000 a year. But this is what you think when you're young and naive.

Mike MIlls (00:05:50) - Loan officer. Now, the girlfriend that he was applying with, she was a different story. She was actually working at a country club. It was a stable job. She was making about 30,000 a year. So at the time at least, sounds like she was making a little bit more than him or about the same. So between them, they had an income of about $70,000 in just their base salary. So I'm thinking, okay, I may actually have my first deal here. This is going to be great. But then of course, like all things, I went to go pull credit and that's when the world changes. So the good news was, is that the girlfriend had credit well over 700. Her situation was great. She had good credit. She had a few little small trade lines, not a whole lot of debt. Him, on the other hand, his credit score was in the low five hundreds. He had delinquent student debts. He had over the limit credit cards. He had late bills on previous credit cards in the past and just had a ton of debt.

Mike MIlls (00:06:31) - So looking at that, I knew that that wasn't good. But, you know, Tom and I had pretty good rapport at that time. So I was like, hey, man, you know, like what? What the heck happened? And of course, he gave me the sob story, which everybody tells, you know, people is like, you know, his parents didn't really educate him very well on a ton of financial information. He didn't know how to manage money when he was in college and growing up, and he didn't understand how student loans really worked. And when you had to pay them and how minimum credit card payments worked and, you know, racking up that student debt that he had and not been paying on it consistently had really put him in a bad position. Not to mention the fact that when he went to go open the restaurant, he had put a lot of a lot of the costs and expense in and opening the restaurant on credit cards. So he had kind of leveraged himself fully to the hilt at that point, because the idea of owning your own business was really attractive to him, and he was like, this is what I want to do.

Mike MIlls (00:07:18) - So he kind of, you know, really stuck himself out on a limb. So basically, Tom has bad credit and a bunch of debt. Now, again, the good news is, is that his girlfriend had a little bit of debt and really good credit. He told me that her parents did a much better job setting her up financially, although she, you know, he said she didn't know a ton about it, but that he said that her parents were just good about making sure that she didn't make any stupid mistakes like Tom did. And really, at the time, again, being a new loan officer, I thought that if I had it, if they had enough cash, that I might be able to find a loan with them for low credit, you know? After all, at that point it was the wild, wild West and mortgages. So, you know, we could kind of do a lot of different things for these before all the changes happened with Cfpb after the Great Recession.

Mike MIlls (00:07:54) - So I was like, okay, well this doesn't look great. But how much money do you have? Well of course they didn't have hardly any. So they had just opened a new business. And I asked them, okay, well where are you expecting to have your down payment, your closing costs. And he was hoping that maybe they could use like a down payment assistance program. Now, since I was new, I really didn't know what I could or couldn't do at that point. So I told him that I would speak to my manager and tell him the whole story. And then I was confident we could try to figure something because I wanted to help. Well, that was a big mistake. So Tom and I talked on Friday, and I said that I would have it all figured out by Monday. And again, of course, that was a very poor choice of words. Your words matter, kids. Take note. So on Monday morning, I got an email from Tom's mom, who happened to be his realtor.

Mike MIlls (00:08:34) - She emailed me a copy of an executed contract for a house, along with the copy of the earnest money and the option check that they put on the home. See, Tom took my I will get it figured out and ran with it again. Words matter. And he took that to mean that they were good to go. So he took his girlfriend out, and with his mom they found the quote home of their dreams. In fact, his girlfriend was already picking out furniture because she was so excited. I'm not sure where they were going to get the money to buy that furniture, but they were certainly looking at it and ready to get moved in and at that time, back then, having a pre-approval letter really wasn't a must to get an executed contract. So the dude's mom was harassing me for the letter so she could send it to the listing agent because they were already under contract. She wanted to make sure she got it over to her to be have it in her files. So at this point, they're under contract, and they thought they were getting their dream home.

Mike MIlls (00:09:19) - And I was about to be the most evil human being on the planet, because I found out from my boss that morning that there was no way we were going to do the loan the way I had it set up. So I was about to crush these people's hopes and dreams and have them want to kill me. At least at that time, social media didn't exist, so I would have been hard to find. They couldn't have showed up to my house and tried to stab me, but I'm sure they would have found a way to do something. So I had a guy who had terrible credit, no income that I could use, and no money for the down payment closing costs, because even though he did get a salary from his job, he was still the owner. And that doesn't count if you show if you don't have tax returns to show the loss, we can't count your salary. So great job, dummy. Way to start off your career, Mike. Good work. So now what do I do? Well, at the time I had a great friend who asked.

Mike MIlls (00:09:59) - She had got me into the business. He was the one that reached out to me and told me to come work with him. His name was Dan and he was one of the smartest guys I knew at the time, especially in the mortgage world. And he was a great problem solver. So I could easily I could often reach out to him and say, hey man, what the hell am I supposed to do? And because he was such a great problem solver, which in reality is what we do all the time in this business, I mean, we're all problem solvers, realtors, mortgage people, title folks. Like, every situation is different, and we're all trying to create a scenario in which we can solve people's problems so they can buy a house. This is what we do. So he suggested that I take the broke bad credit, no money to generate off the loan and find a co-signer for the girlfriend. And then I could try to see if I could get a gift for their down payment, because the realtor mom had actually done a pretty good job and got the seller to pay most of the closing costs on the contract that I didn't currently have a loan for.

Mike MIlls (00:10:46) - So I swallowed my pride. And you know, it took me a minute to make that call because, you know, whenever you have to call someone to give them bad news, it's never fun. And so I called Tom and I gave him the options for what he could do. And one of the lessons that I learned here right away, in the beginning was that you never say no. When you're in our situation, you always give options. Now, sometimes the options aren't realistic, but they still have options, and sometimes the options that you think that they couldn't do, they actually can. And if you never presented them with the choice, then they would never be able to get their home. So that's what I did. I said, hey, here's our choices. So somehow Mr. Degenerate got his mom, the realtor, to co-sign on the loan. I would have loved to have been a fly on the wall of that conversation with the girlfriend that he wasn't married to, and the girlfriend's parents put up the money for the down payment as a gift.

Mike MIlls (00:11:36) - Again, how this guy pulled all of that off, especially since he hadn't, you know, quote, put a ring on it and was a was basically a broke, glorified restaurant manager is still beyond my comprehension. But he pulled it off. So they bought $130,000 house, which at that time I know everybody hearing that today wants to throw up because there are no houses. But it was a nice house and a nice Arlington neighborhood near the lake that rent at the time was only $600 a month because they weren't living in the greatest place, and their new mortgage payment had actually gone up to $1,200 a month. So it was double what they were paying, which made everybody kind of a little nervous. But, you know, I was happy to get a loan. They were happy to get a house. They were going to figure it out, and they seem to have a pretty good support system around them. So I think, you know, at that time it seemed like they were going to be able to manage.

Mike MIlls (00:12:17) - So good news is we closed that loan and they got the house of their dreams and everything worked out. But since the first house, Tom and his girlfriend, they did get married. They had two kids. Tom's wife even became a realtor. And they have come back to me for each of their four primary homes that they've bought since then. They've had three investment properties and even bought a commercial property that I helped them with. I've done loans for all their friends and family, and literally built my entire career on Tom and his wife's referrals because wife's Tom's wife was a realtor. So you're sitting here saying, Mike, are you telling us that you built your entire career on one loan that you did for a couple years and years ago when you first started your career? And how is that even possible? Well, it's possible because Tom was me. You see, I told you in the beginning that I wanted to tell more stories for my next hundred episodes. And what better story to start with than my own.

Mike MIlls (00:13:07) - And by the way, every part of that story was true. Some of the timelines might have been moved around a little bit. Like my mom, the realtor actually helped us buy our second home, not our first home, because I just become a loan officer and didn't have any commission income for two years, which again goes into that commission play. And we actually bought our first house when I had the shitty job at RadioShack, which I later left to go open the restaurant, which was a great and horrible decision all at the same time. But let's not let facts get in the way of a good story, right? But every other part of Tom's life happened to me. There is of course way more to it, but I tried to keep it focused on real estate as much as possible, because nobody wants to hear me ramble on about my life. But the point is, is that I had nothing. I had been irresponsible, mostly due to a lack of knowledge of financial education. In fact, my I joke that my MBA came from seven years of running and ultimately failed restaurant versus going to like TCU or SMU.

Mike MIlls (00:13:57) - I spent about the same amount of money, but without going through those bad financial times and bad decisions, I would not be where I'm at right now. I just got lucky and picked a great wife with a great family, and had the support of my mom to help pick me up when I failed. You know, she didn't teach me a ton about money and how to manage it when I was growing up, but she was always there when I really, really needed her. I just didn't ask very often because I wanted to be self-sufficient. I tell the story not just because it's about me, but because I want my podcast to help people understand that we're in a pivotal time right now, not just in real estate, but in the future of our kids ability to be financially free. Because right now, as a society, we don't educate our kids enough about how money and the money system works, and we're slowly losing the family and community structure around our kids that have been the support system for many of us when we fell on hard times.

Mike MIlls (00:14:42) - Now, look, I was really lucky. I had amazing humans around me that cared enough to help me when I was at my lowest. But not everyone had that. And less and less young people today have it, and with housing becoming more and more unaffordable every day that passes, it makes it less and less likely that the. Next generation of Americans will have the opportunity to share the most accessible path to the American dream we have all had, which is owning your own home. And that has me really worried for the next generation and my own two kids. Look, my wife and I are going to be there to help our kids in any way we can, of course, but not everybody has that, and that makes the opportunity open to less and less people. So my goal of these stories and this podcast going forward is to teach. I've loved teaching my entire life, from teaching kids how to swim and teenagers how to teach kids how to swim, to coaching every sport and every academic competition that you can think of.

Mike MIlls (00:15:31) - With my kids over the years, teaching truly is my passion. And if teachers were paid the way they should be, then I'd be doing that instead of doing mortgages most likely. So God bless to all the educators out there for what you put up with and the lack of appreciation that our society shows you. But my hope with the show is to teach you not what I know, because I don't know much, but to teach you what I've learned from way smarter people than me and share their stories, their falls, their triumphs, and hopefully play some small role in helping the next generation of humans learn how to navigate this often rigged system so that they can find a way to get a piece of the American dream that we were all promised but don't often achieve. Look, there's a lot of big money interests out there that want to slowly erode this possibility and keep you dependent on them to live your life. They want you to rent everything. They want you to rent your music. They want you to rent your movies.

Mike MIlls (00:16:17) - They want you to rent your phone. They want you to rent your car. And now more and more, they want you to rent the biggest expense in your life, which is where you live. You're basically becoming a battery for the economic system to keep it going. And my goal is to highlight people that can help you break out of that. And who knows, maybe even along the way, figure out a way to make housing more affordable so more people can get the option to share. In this American dream we were all promised. I have no idea if it's possible, but I sure as hell I'm going to keep trying and I hope you'll come on the journey with me. So until next time, be great humans, keep grinding because your life is what you make it. So make it great.