OUR HOSTS: 

Corinne Foxx - @corinnefoxx

Natalie McMillan - @nataliemcm and @shopnataliemcmillan 

What we're drinking: 2007 Chateau Luderante Sauternes 

TOPIC: 

Today, we’re breaking down the basics of homebuying. We define the key terms that are associated with the process, common misconceptions about mortgages and homeownership and how to determine which type of loan is right for you. We also give an overview of how the whole lending system functions and get to the bottom of who Fannie Mae and Freddie Mac are. Whether buying a home is top of mind or a distant dream, this episode is meant to help you decode mortgages and understand everything that goes down between pre-qualification to move out day. 

In this episode, we discuss:

• A step-by-step guide for buying a home, condo or property 
• What it means to be ‘pre-qualified’ for a loan and where to go to do that 
• Corinne’s homebuying experience 
• How banks and lenders get money for your loan 
• Pros and cons of fixed rate and adjustable rate loans 
• What happens when you want to move before you’ve paid off your loan 
• The process of refinancing a loan 

END OF THE SHOW: 

Corinne and Natalie introduce Hottie of the Week: Brad Pitt 

WINE RATING:

2007 Chateau Luderante Sauternes  = 7.5 / Brad 

WRAP UP:

To wrap up the episode, we play an AIDTR original game called Facts and Hacks! Nat shares her discovery that you can get free audiobooks through your local library. Corinne’s hack is that you can schedule a Finance Friday into your weekly routine where you take 30 minutes or so to go over your financial portfolio.

We have a brand new newsletter for our Am I community. You can sign up for the newsletter on our website: amidoingthisrightpod.com

You can email us for episode ideas or Random Advice: amidoingthisrightpod@gmail.com

Follow us on Instagram: @amidoingthisrightpod 

Don't forget to rate and review the podcast! It really helps us grow!

[00:00:08] Natalie McMillan: And I'm Natalie McMillan.

[00:00:19] Natalie McMillan: And each week we cover a new topic and we drink a new bottle of wine.

Like, we need to know this

[00:00:48] Corinne Foxx: even work? Okay. We're going to be starting at. Basics. What is a mortgage key words? We love a key word. I love a definition like down payment, interest rate, any of that. And then we also have a special edition investigation episode as to who are Fannie Mae and Freddie Mac.

And where are they? What are they up to? What are they doing? And what's going on? What's what's happening here? Who are these

[00:01:19] Corinne Foxx: And we're also, we playing a little wrap-up game, a new one today, the episode facts and hacks guys. We had to do it and been talking about facts and hacks for so long.

[00:01:35] Corinne Foxx: need that. We need it. It's coming. You guys, don't you worry first now let's get into the wine that we're drinking this epi. Yes. Okay.

What lewd do. Wow, what does that.

[00:02:05] Natalie McMillan: off. It's a 2007. So it, I'm not sure if it's over the hill or not. I will say

[00:02:14] Natalie McMillan: I do think that these are kind of like dessert wines. Oh, okay. So I think it has supposed to

[00:02:25] Natalie McMillan: very confused.

Like, why is it so don't something's wrong? I think these are less sweet. I'm not sure I'm going to find out. We

[00:02:36] Natalie McMillan: Well, I mean, this saw turn or saw turn a, I really have no idea. I think that it's like a dessert wine, but like a little less sweet than the one we had.

Okay. I'm

[00:02:49] Natalie McMillan: the age, everything. I also don't know if I'm, I could be completely wrong on everything. Let's let's take a step. Whoa, whoa.

[00:03:07] Natalie McMillan: Pigs, it's a breakfast, but it's a breakfast cereal commercial, but it's a breakfast, Syria.

It was on, in like the early two thousands. Not you texted me

And I just wrote LOL. I'm very curious. This was at 10:00 PM. She sent this

[00:03:57] Corinne Foxx: max millennials. That's literally millennial

Gen Z's are

[00:04:12] Natalie McMillan: right now. Oh, okay. Well then it is exclusively millennials. Yeah. So this is the one thing we have guys. That's the thing we have. So I was thinking about how rap dances. No, we are the only generation that can actually say we grew up with rap. So like rap didn't become popular until like the late eighties, early nineties ish.

Right. So our first memories, it was like biggie, Tupac, all that. Then we moved into like Dr. Dre and w. Then we were around for the rise of G unit 50 cent, M and M, right? Like all of these people that like defined these areas of rap, we were there when they came. I could

[00:04:58] Natalie McMillan: remember when Eminem came out, I remember when 50 cent came out with candy shop, I remember all these things.

And then even going into like Kanye. I remember when Kanye came out, Kendrick Lamar, T-Pain all of these people that like were revolutionary. We were there. And we always will be like, until we die, we'll have been there for the evolution of rap music

It was 1970s, but I see what you're saying, where it wasn't like popularized in the same way until really maybe like the late eighties

[00:05:38] Corinne Foxx: wow. Because

[00:05:41] Corinne Foxx: thinking about this at 10:00 PM yesterday?

Remember? No, a Connie young Jeezy sole survivor. Oh yeah, yeah, yeah. That song I was listening to it. It's

yeah, I know what you're talking about. First of all, where is Aycock? Cause this is a

[00:06:08] Natalie McMillan: Africa. I know, but like he had banger after banger, after banger and then kind of like disappeared a little bit on the whole

[00:06:19] Natalie McMillan: areas.

I love him. I love him. I love econ. I once saw him at a hotel in Sandra pay. Oh my God.

[00:06:30] Natalie McMillan: With a con, but like, so then I was thinking, I remember when econ came out, I remember when this song came out and then I remember when auto tune came out, like we were there

Seeing this T pain, even though he's the king of Auto-Tune, he's an amazing singer.

[00:06:50] Corinne Foxx: he was on messenger. Yes. But we'll link it. Maybe I'll link it in the newsletter this week. If you guys send them for a newsletter, the clip of him singing, like buy you a drink, what? He's like actually singing

Oh my God. Oh my God. It's also Chris brown. Wow. All these people that came out and

[00:07:12] Natalie McMillan: Drake J Cole. We were there for

[00:07:20] Natalie McMillan: that's what I'm saying. It can't be younger because they can't remember like the biggie Tupac, puffy.

It was puffy at the time than it was P Diddy than it was Diddy. Like they can't remember that because they're too young. Cause we were barely

that's

Like we, as millennials can know all of the sudden, this is

[00:07:56] Natalie McMillan: but it's true. If you put on a song from 95, I know it. If, you know, if you put it on a song from now, I know, and every single one in between that's true. So millennials, we kind of got fuckked on everything, but we do have that we

I love that. Oh,

[00:08:21] Corinne Foxx: that was, uh, that was his song with his kiss.

[00:08:28] Corinne Foxx: oh, the young money song that I know every word to rock bed, rock. It has all of the,

[00:08:39] Corinne Foxx: Millennials and gen Z. Sorry, gen

[00:08:46] Corinne Foxx: Minaj. Oh, you guys don't eat little Chucky.

[00:08:53] Corinne Foxx: Oh, who else was in that bird, man? I think it was bird man. Now maybe not, maybe not. Maybe not

You know, that was like a whole little air. He wasn't young man, a

[00:09:08] Natalie McMillan: to move into mortgages. I know this is just these dragging out to talk about mortgages. Okay. Yes, he

[00:09:19] Natalie McMillan: money, money, money, billionaires. Yeah. He was a part of

Wow. Okay. So mortgages, why we chose this topic, which is just seems like an insane trend.

It's a, yeah, that it's a 1 0 1 that we should probably understand by about. Corrine actually bought a home last year and she still doesn't like 100%. I don't know how this idea, how it

[00:10:00] Natalie McMillan: was. So yeah, we thought we would do all the research for you.

Figure out what the fuck a mortgage is. Just break it down.

[00:10:11] Natalie McMillan: you know, we love definitions. Love, love definitions. Corrine, what is a mortgage? What is,

Amortization and motorization, which is often like 25 years or 30 years or something, mortgage loans are really like any other loans in your life. You can borrow some amount, you get an interest rate at which you pay it back. And there's a scheduled that you make your monthly payments. So that's really what a mortgages standards

Alright. Like living

So that's the amount of cash that you bring into the transaction. So down payments may be described in like dollar terms to like $10,000, like $20,000, or maybe like as a percentage of the home sales price. So like you need to put down 10% of the home sales price. So if it's a hundred thousand dollar home,

Okay. Okay. Also loan amount. So that's the amount of money still owed on your mortgage loan that you still owe on the mortgage loan? So loan amounts are sometimes called principal and the principal is the amount of money you borrow from the bank to pay off your loan. So for example, if you put down 20,000 on a $200,000, I am so sorry, 20% on a $200,000 house in cash, your principle would be 160,000.

So basically the leftover.

[00:12:24] Natalie McMillan: right? That's your point? That's the principal loan amount alone term is the amount of time you have to pay back the loan and they're usually in year. So like 1530. Or they could even be in months, like 360 months.

Like when people do that with their toddlers. Yeah. Tell me she's three and a half

[00:12:46] Natalie McMillan: and then interest rate. So that's the borrowing rate on emo

[00:13:00] Natalie McMillan: Okay. So the monthly pay.

Is the amount needed to pay off the mortgage over the length of the loan and includes a payment on the principle of the loan as well as interest. They're also usually property taxes and other fees included in the monthly bill. So it's kind of like

[00:13:22] Natalie McMillan: Mortgage. Yes.

[00:13:38] Natalie McMillan: And then those fees we were talking about, those are various costs that you have to pay upfront to get the loan.

Yeah. So there's like little random fees to be prepared for. And then there's the down payment. So the larger down payment, the better your financing deal will be. So you'll get a lower mortgage interest rate, pay fewer fees and gain equity in your home, more rapidly. So kind of standard. 20% of the sale price in cash when you purchase that.

Yeah.

[00:14:18] Natalie McMillan: time? Right. And also common misconception. Cause I really didn't know how any of this worked.

Cause I used to think, oh, if you're buying a million dollar home, you have to have $1 million in the bank. Me too, until last year I thought that. We'll say 20% of that. So if you're like looking at a house that's a hundred thousand dollars and you're like, well, I don't have a hundred thousand dollars. You need pretty much like 20% of that.

Yeah. So that's how it makes it more. It makes it a lot more digestible and makes a lot more sense.

[00:14:50] Natalie McMillan: Yeah. That's why we're here. Okay. Okay. So how do people get pre-qualified for a loan and what

So the bank will tell you how much money you can borrow. And this loan is the amount of mortgage you pre-qualify for. So you might recall hearing other home buyers talk about. Budget like, uh, like we were just saying, like, I'm looking at a a hundred thousand dollar home it's because they've been pre-qualified.

So that's the amount of the loan you get pre qualified for is your budget. And you'll need to look for homes at, or below that dollar amount. So you can even like go looking for houses until you get pre-qualified. Cause you don't know how much house you can afford.

Shaq and this mansion,

[00:15:52] Natalie McMillan: you can afford. Yeah. So it sounds like your budget is the amount you get pre-qualified for from the bank.

And then you look at that number to get the solid understanding of how much house you can reasonably and comfortably pay for.

It might not be exactly that, but like, yes, maybe you could afford to spend $10,000 a month on a house, but you would have no room to eat. They also like qualify that they're like, can't afford that, but it has to be. 40% of your income so that you can like actually live your life to,

Yes, exactly. Okay. So we also learned there are three primary types of mortgage loans

Very good. Well, very, you know, 30 year mortgage. Got it. The second type is the. H a loan. So you'll want to get an F H a mortgage loan. If you have a credit score too low to qualify for a traditional loan, or if you can't put down anywhere near 20%, but you have to be, be aware of extra fees. The F H a may charge you, you will have to pay mortgage insurance with this type of loan as

Is the FHA, the federal housing association. That's.

Okay.

[00:17:55] Corinne Foxx: We have to, as we have to do. Okay. So how did the banks and the lenders. Get money for your loan. Like they're giving you all this money, where is it coming?

[00:18:09] Corinne Foxx: our mine's just about goddamn exploded.

[00:18:34] Corinne Foxx: little definition.

Throw a big word at you guys and not circle back

[00:18:48] Corinne Foxx: Cash money and young money

So, okay. Most loans, 90% of loans are government backed. And Fannie Mae and Freddie Mac were created by Congress. They were Congress created, they perform a very important role in the nation's housing finance system, which is to provide that liquidity, stability and affordability to the mortgage market.

Gotcha. So Fannie and Freddie. Who are not real people, but I like to think of them as we're going

[00:19:36] Natalie McMillan: young Fanny, young Freddy. Yes. I love that. So young Fanny and young Freddy, they purchase home loans made by private firms.

So provided the loans, meet strict. Credit and under writing standards, then they package those loans into mortgage backed securities and guarantee the timely payment of principal and interest on those securities to outside investors, young, Fannie, and Freddie also holds some home loans and mortgage securities in their own investment portfolios.

Also securities are like stocks and bonds and things like that. So not liquidity like cash security. Non-cash assets.

[00:20:21] Natalie McMillan: So basically

And like we said, package them into these little securities. Then they sell those securities to investors and then investors buy them because they're considered safe because Fannie and Freddie take on. Of the risks and then the lenders and the banks. They benefit too, since the government takes on much of the default risk as well.

So lenders can make more loans to. More people. So together, young Fannie and young Freddy back about half of the mortgages in the U S so when I was like, so this is why I need to ask questions. Right. I'm getting my mortgage. I kept saying, okay. Yeah, I was talking to a mortgage dude. Right. He kept saying, I got to go talk to Fannie and Freddie.

And I said, who? I was just like, people let me know. Yeah. Well, they'll get back to us and say, if you're approved, It may, I should have been like, why aren't you approving me? Right. Cause aren't you the dude, but no it's Fannie and Freddie, they had to be like, yeah, she's Gucci, we'll back this loan. Right. And then that's the approved, it's all coming from.

[00:21:40] Corinne Foxx: you. Oh yeah. He puts a whole hierarchy. Crazy. Is that I didn't ask him. I was like, all right, go

Like he's the one in

[00:22:09] Natalie McMillan: a fixed rate, mortgages and adjustable rate mortgages or a RMS, and those are the two primary mortgage types.

So while the marketplace offers numerous variety, In those two categories. The first step when shopping for a mortgage is determining which of the two main loan types best suits your

When you sign the loan papers, you agree on an interest rate and that rate never changes. And this is really the best type of loan. If interest rates are low, when you get a mortgage. Yeah. Because you're locking. Yeah, locked-in tell you like this is what your monthly payment is and it will not change.

That's good.

As well. And so what your monthly payment. So it's generally safest to stick with a fixed rate loan, to safeguard against any rising interest rates. And if rates drop, you can refinance your mortgage to take advantage of with of the lower rates.

[00:23:33] Natalie McMillan: You also have to decide on that mortgage term that we discussed earlier, which is the length.

Yeah. So like a shorter term means your balance is spread over a shorter period of time making your monthly payments higher.

[00:24:09] Corinne Foxx: Now I have a question. This is something I did not know. Okay. So like I have a 30 year mortgage, right? Do I ha I have to live in my home for

Cause I

[00:24:23] Natalie McMillan: And the one thing I have never understood is like, when people would like buy a house and then just like sell it a year later, I'm like, well, what happened to the 30 years? Like, are you, you just keep paying it like, right. That's what I thought.

I really had no idea. So. We looked into it. So one important thing to know is that taking out a 30 year mortgage does not mean you're committing to living in that home for 30 years.

[00:24:50] Natalie McMillan: move or what, and you don't have to keep the loan until it's end date and pay it off in full.

So that also makes sense that when. I'm still paying a mortgage on a different house that you no longer live in, right? Yeah. But Hey, nobody told us this stuff. Um, and in fact, most homeowners do not. They either sell or refinance their mortgage before the term is up. So if you move and you sell your home before it's paid off, part of the proceeds from the home sale will be used to pay off any remaining loan amount due to your mortgage, to the lender.

So basically. You saw the house. If you made a profit, then you pay off the rest of the mortgage with that. And then you keep the little chisel

[00:25:32] Natalie McMillan: yourself. If you decide you want a different type of loan or a lower interest rate later on, you can also, but we've been during this word around refining.

Your mortgage. Yeah. So that involves replacing your existing mortgage with a new loan that benefits you financially. And the process of refinancing a mortgage involves taking out a new loan and using the funds to pay off the existing alone. Okay. This seems very complicated, but you can refinance with the same lender that did your original one, or you can do a different one.

Oh, okay. So yeah, if there's lower interest rates and you're like, Hey, I'm going to pay this one off, but I'm going to start a new. But like smaller, shorter, less expensive one. You can do that. But the big question that I have then is like, okay, so you're paying this person back the lender and they're paying Fannie Mae young money money.

So do you actually own your home? If you have a mortgage?

You don't play your payments. The lender has the right to seize and sell the property. And I believe that. Foreclosure is

[00:27:06] Corinne Foxx: on. Okay.

Right. And so likewise, if you don't pay your property taxes, your city or county can seize it to pay the taxes. Uh ha yeah. It seemed like you own your home because of these third party rights, but just keep in mind that there's no need to worry about losing any control of the property. If you hold up to your end of the agreement and that's it.

[00:27:31] Corinne Foxx: B arch

[00:27:36] Corinne Foxx: I love that there's a wrap. That's been blended into the mortgages

[00:27:49] Corinne Foxx: Okay. We'll help you guys learn more about mortgages. Down-payment Ms. May young, Fannie, and young ready, and how to start the process of buying your first home.

Obviously there's a lot more processes too. There's the friggin inspection and all that stuff. It takes a lot, but. This is level one, honestly, though,

[00:28:13] Corinne Foxx: understandable than when we were researching and researching it. I was like, I don't know what this episode's

Yeah. And then also this whole hierarchy of like the government and then Fanny from your research. I was like, I do not understand this, but kind of, if you think of it in rap terms, Lil Wayne would be the Congress. Oh, who then, you know, he created, he was young. He was the first guy is young man. Then he created young money with Fannie Mae Freddie Mac.

Right. Okay. Drake Tyga, the whole gang. Right. And then they, they help the people. Under them. Yeah. Like, you know, a little Chucky, Chucky, the new boys, they

[00:29:03] Natalie McMillan: know, but yeah. But I think that they were kind of like, and then

[00:29:08] Natalie McMillan: the borrower.

And then here you are just enjoying. Just enjoying it and paying your, your apple music subscription. Our UK stopped paying the apple music subscription. They take it away.

[00:29:21] Natalie McMillan: we're closed on your rap music. Um, we need, we

This is for our wrap mortgages.

[00:29:49] Corinne Foxx: I don't know Mimi either, but he's, he is a

Yeah. Once upon a time in Hollywood though, he different story, he looked great in that, but you know, this guy, apparently according to Google has a lot of

[00:30:06] Natalie McMillan: it's also not just living in, I guess he. Flips them and S like he invests

Yeah. Okay. So one, two Brad Pitt. What are we thinking? Well, what what's it called? Okay,

[00:30:26] Corinne Foxx: me. Um,

[00:30:39] Corinne Foxx: now. Okay. So wonder bread fit. What are you reading

Let me take another sip here. I'm going to give it a nine. I'll

[00:31:04] Natalie McMillan: Seven

[00:31:11] Natalie McMillan: Bradley Pitt

[00:31:33] Natalie McMillan: Providing you with. Hot facts and hacks.

[00:31:46] Natalie McMillan: free, free little life hacks and life facts that you should know.

Okay.

[00:31:53] Natalie McMillan: Life hack that I just actually found out this morning and was like, oh my God. So not a fact a hack. You know how I don't know about you. I love audio books because I can listen to them while I'm like cleaning or whatever, but I hate that you have to have an audible subscription.

You have to pay more money to daddy Bezos. And I don't like that guy. I'm just like all this garbage. Okay. If you get a library card, They're all free. How literally go on. Well, for us, I Googled the Los Angeles county library. You sign up online for a library card and then you have access to all of the audio books for free.

What? Yeah, I think

[00:32:41] Natalie McMillan: we've been tricked in thinking you have to have like a subscription and all this. No, you just, you got to remember your local library. I like, you can get, like, you can get any book there. Right? You can also listen to any audio book for

Here's the thing I'm really sad that I've turned my back on libraries because they make sense. They make, because like, there's so many books that I read, but then I put them on my shelf and I'm like, I'm never gonna read this at kin. Yes. So it makes sense to go also eco

[00:33:12] Corinne Foxx: yeah. Our library is going to go to business.

I'm going to literally cry. There are

[00:33:23] Corinne Foxx: I forgot about them. That is definitely a hack. That is a hack and a half. Oh my God. I love that. Okay. So I also have a hack. Okay. Something that I. Realizing I never do. And I'm now going to schedule to do, which is look at my finances.

Like I never like checking in. I've been wanting to buy cryptos since we've been talking about crypto, but I never put time in to do that. Right. So I was thinking, I was like on a walk and I was like, I kept hearing in my head, financial

[00:33:52] Corinne Foxx: Friday, and I'm saying financial Friday. And I think it was actually something you kind of started doing.

And then, yeah. So anyways, what I'm going to start doing now is. Putting time in my calendar on Fridays for 30 minutes an hour, whatever.

[00:34:09] Corinne Foxx: I'm just writing financial Friday and just sitting down and going over my, you know, investment portfolio, going up vendors, checking in on things and just putting the actual slotted time to do that.

Because as a very busy person, You know, I can look at my bank account on my phone, but that's not like an actual, like, conscious, like where would I like my money to move? And like, there's no strategy. It's just like, oh, that's how much is in my bank account? Or that's how much my credit card bill is payout right now.

Right. So

And I noticed that I had a charge from my plotty studio that I was like, what is this? So I called him and I was like, Hey, what is this? And they were like, oh, that was a mistake. And they took it right off, but I would have

Yeah. Okay. Well, if you guys incorporate any of these facts or hacks into your life, please DM us and let us know. We'd love to know if these help you guys. I know.

[00:35:20] Corinne Foxx: you, or if you guys have a life

[00:35:28] Corinne Foxx: Oh my God. How fun would that be? Okay, well, also, if you guys don't want to miss an episode or you're nervous, like, well, I miss an episode. You can sign up for our newsletter on, am I doing this right? pod.com. Get on our mailing list. We send you one email a week just to wrap up the episode. We send fun gifts.

We send, oh, I'm sending the video of. Oh this week, baby angel T pain. So, you know, it's a good time in your inbox. Yeah, it is. And also we have our random advice segments. So if you guys are going through something in your life, personal and your career, whatever, doesn't matter, you can email. You know your little situation and we will give you random advice here on the podcast.

Anonymously, always anonymous, but never call you out like that and

[00:36:16] Corinne Foxx: Yeah, we, yeah. You know, we, we got busy, but we're excited and we're, we're, we're prioritizing it. We are for sure. And then also, if you guys liked this episode, if you liked the podcast, please, please, please rate and review our podcast on apple podcasts.

And we might even read your review

[00:36:40] Corinne Foxx: like I learned

[00:36:44] Corinne Foxx: right, well, we'll be back next week with another episode