Mortgage Credit Expert Explains How to Improve Your Credit Score Fast

Mike Perkins (00:00)
Well I want to be the opposite. You know, mean, if everybody’s going AI, I want to be the non AI guy. I want to be the guy in front of the camera that’s a real human being. mean, you know, once again, to try to set yourself apart, but yeah, I see it all the time. You know, mean, realtors don’t want to show how, so they create a, you know, fake person. go through the hell. I mean, it’s kind of astonishing what AI can do

Dylan Silver (01:49)
Hey folks, welcome back to the show. Today’s guest, Mike Perkins is a mortgage professional with over 30 years of experience, including many as a mortgage credit counselor. He’s helped many thousands of home buyers improve their credit and qualify for home ownership, primarily in the Texas market, especially Houston. He’s also the creator of the Music and Mortgage YouTube channel where he combines mortgage education with original songs.

to simplify complex topics in an engaging way. Mike, thanks for taking the time today.

Mike Perkins (02:22)
⁓ glad to be here.

Dylan Silver (02:24)
What’s the most common issue that keeps people from qualifying for a mortgage?

Mike Perkins (02:31)
Well, mean, it’s a good question. It could be several things. Credit is a big issue, for sure. And I would say the second big issue is probably debt-to-income ratio. Third one probably coming up with enough money to close. But credit is a big one. And that’s my specialty.

Dylan Silver (02:46)
Now,

when someone comes to you with credit that may be rebuilding or frankly poor credit, what are the first two to three things maybe that you look at immediately?

Mike Perkins (03:00)
Well, I’m

to obviously look at the credit scores and try to figure out what is impacting the score. Because usually it’s a score-driven problem. I’ll look to see how much credit they have. If you’ve got a whole bunch of credit and then you’ve got a whole bunch of ad stuff, especially if it’s recent, then that’s going to be a problem. It’s going to be more difficult to get your score up. If it’s lack of credit, which is what I’m hoping for, then they need to go out and open a credit card. The collections are tricky. Most of the time, it doesn’t help to pay them.

but there’s variance on that. If I can, I’m gonna sit down and run the manual credit score simulator and go through and try a few different scenarios to see what it takes. It also, of course, depends on what loan program they’re going for. If they’re an investor, the score’s gotta be good.

Dylan Silver (03:44)
Now, if someone is trying to improve their score quickly, what’s a realistic timeframe for someone to boost their score up?

Mike Perkins (03:55)
Well, there’s no simple answer to that. It depends on what’s wrong with them. They may be able to fix it in two or three months. If they’re really, really bad, it might take them a year. Having said that, there’s almost no situation out there that can’t be fixed in between one and two years, assuming that the borrower goes out and establishes enough new positive credit. And in almost all cases, that needs to be a real credit card that reports as revolving credit.

Dylan Silver (04:21)
Is there anything that you see people doing when trying to fix their score that could actually have the opposite effect?

Mike Perkins (04:29)
Well, see them doing, yes, I mean, that is possible. If they go in and pay off, you know, very old collections, things that are hitting something close to the seven year mark, it is possible that it could lower their score. A more likely scenario is it will do nothing. You know, it’s more like things they do that don’t help. It’d be difficult to damage a score unless you make late payments. I mean, that’s the most frustrating thing is to work with somebody and get the score up where it needs to be and then they pay somebody late, they make their car payment late or something. I mean, that’s just gonna kill you.

in most cases.

Dylan Silver (04:59)
Now,

now you mentioned folks who have maybe good credit, but not established. They haven’t taken out a mortgage before. That can be a tricky situation, right? Because you’re asking a lender to take a shot on someone with limited credit history, maybe decent income, but not super high earner and not established credit. What are the strategies that people can take in those instances? You mentioned opening a credit card.

Mike Perkins (06:15)
Well, that’s a big one. If the score is there and it’s the fact they don’t have established credit, you may be OK. It just depends on what it is. mean, what you would do as a lender is get enough information to run the automated underwriting program, either desktop underwriter or loan prospector, and see if the system will take the credit. Because if the only thing on somebody’s credit is authorized user accounts, for example.

And they’ve had them long enough where they got a score and they actually have no credit in their name, then that could be an issue. But if they have some small amount of credit and you got three scores and they’re good, you I mean, you may be okay, even if you think they don’t have much of an established history.

Dylan Silver (06:56)
That’s actually an interesting subject. If we can get a little granular here, you mentioned authorized users. So my understanding is this is typically a family member who puts them in many cases on their credit card so that they can use the card. How does that look in the eyes of the lender?

Mike Perkins (07:11)
That’s great.

Well, there’s nothing wrong with that. You know, as long as the account that they get added to is not bad. I mean, if the account they get added to is maxed out at 90 % of credit limit or, you know, has some recently payments, then it’s possible being added as an authorized user could lower the score. But most of the time, it’s just something that has some effect on the score. Usually not near as much as if you open a credit card in your own name. I would say authorized user probably help you about a fourth as much.

But I mean, it is a strategy in some situations. If you can run the simulator, you can actually plug that scenario in if they give you information on the credit card that they want to be added to, mainly the limit, the balance, and when the account was opened. You can model it.

Dylan Silver (07:56)
One of the things

that I’ve seen and I actually haven’t asked this question to someone in this space is for younger people who may not have credit history, don’t have two years on the job, realistically, can they say, if they’re 18, 19, 20 years old and they’re in that situation, can they qualify for a home by themselves in the next two years or they really have to?

Mike Perkins (08:03)
Hmm.

Thank

Dylan Silver (08:23)
and maybe five years to get established, have two years job history, have more credit? What’s a realistic timeframe?

Mike Perkins (08:30)
Well, I mean, if they have a good enough job, you know, then theoretically, let’s they got a good enough job and the job is all W2 or 40 hours a week. There’s not any kind of variable income. You’re not depending on overtime bonuses, commission, that sort of thing. Then they can qualify theoretically immediately because you can count being in school as years of job history. You know, I mean, they need to be on their job long enough to get a pay stub, obviously. And, you know, once again, you have to put this information in the system and see if it takes it.

Theoretically, mean, they could buy right away as long as you’re 18.

Dylan Silver (09:04)
The school has two years of job history. think this is where mortgage professionals who have experience really are super valuable because there’s a lot of situations, I know personally, and then other young people where you might be in school or getting out of school and you’re basically being told you have to wait, you’re gonna need a cosigner, and so many other factors. How often you see

lenders going the extra mile in order to qualify people in those situations? Or is that more uncommon?

Mike Perkins (09:38)
That’s a good question. It just depends on the loan officer’s experience, know, how much time they have and whether they want to dig into it or not. I mean, I’ll always dig into it. If I think anybody’s got a 50 % or 40 % or 30 % chance even of qualifying, I’ll dig into it and I’ll try to get to a point where I can once again run the automated underwriting system. If your audience doesn’t understand what that is, do think they do?

are familiar with that term?

Dylan Silver (10:38)
Let’s walk through

it. Let’s walk through it. Yeah, what is the automated underwriting system?

Mike Perkins (10:42)
Well,

it’s going to try to establish whether or not a particular loan is eligible to be purchased by Fannie Mae or Freddie Mac. That’s what it does. Because the majority of loans go through Fannie Mae or Freddie Mac. They’re a reseller, essentially a wholesaler of loans, a middleman. The lender makes a bunch of loans, sells them to Fannie Mae or Freddie Mac. The lender gets paid immediately, and then Fannie Mae or Freddie Mac group them together and turn it into a mortgage-backed security. And being acceptable,

for Fannie Mae and Freddie Mac is kind of a universal standard out there in the business. And the computer program is going to make that decision. On a conventional loan, that decision is binding on the computer. mean, you’re not going to overcome it unless you put in information that’s wrong. On a government loan like FHA or VA, is possible to overcome a decline with the automated system by a human if there are some reasons for that. And there may be, especially with VA.

Dylan Silver (11:41)
Okay, that’s very interesting. So in certain circumstances, depending on the loan type, even if the automatic system declines it, if you dig in and go the extra mile, there may be a way to overcome that.

Mike Perkins (11:55)
If it’s FHA or VA. Now that’s not going to apply obviously to someone buying an investment property. Okay, which is your focus. I mean, know, an investment property, you’re going to have to go conventional on that. And so the decision is going to be binding. I might add that it is not so easy to overcome the computer’s decision. It is possible in some cases, but that’s not something that you can count on or guarantee. And it’s a bait of the rear.

Dylan Silver (12:00)
Okay.

Now, with

larger down payments, does that solve a lot of these issues? If someone’s coming with 15 to 20 % down, will that help a lot?

Mike Perkins (12:30)
Yes, the system is going to go in and look at multiple factors to try to make the decision. It’s going to look at ⁓ what’s called the debt to income ratio. That’s a big one. And then it’s going to look at how much money you got saved that you’re to have left over after you close on the home, what’s called reserves in the trade. And then it’s going to look at the amount of down payment. And then it’ll look obviously at the credit and the credit scoring, and then it’ll look at the employment and those kind of things. And it makes a decision based on all of those factors.

So if you’re a little bit deficient in one, but you’re a little bit stronger in the other, you still may be able to get approved. It’s gonna look at it as a combination. And the amount down is very important. I mean, sometimes if I got a borderline case, if I increase the down payment, by 5%, that might solve the problem.

Dylan Silver (13:15)
I’ve also seen in the investor space DSCR take off like wildfire and it’s been interesting because from my understanding DSCR requires a large down payment right and it’s mainly being used as an investment product but I could also see a use case for where if someone maybe was having a difficult time qualifying for some other types of loans maybe DSCR is right for them as well such as if they can’t show a large you know tax return or something like

Mike Perkins (13:30)
Hmm.

Well, you know, there are other things that if there’s no investment property involved, I don’t know anyone that’s going to do a DSCR. Now there are other things they could do, you know, like a bank statement loan, there are asset based loans there, or even loans that combine some bank statement and some assets. I mean, there is ways to overcome that. But DSCR is pretty much investor. I might add that the DSCR, the bank statement and the asset loans, those are so called non-qual, non-QM mortgages. they fall in a kind of a specialty category.

And in that situation, it’s the wild west. Each individual lender that’s doing those can set whatever policy they want. The down payment can be whatever they want it to be. So those are not as uniform.

Dylan Silver (14:26)
I’ve seen

it. This is actually a good point. You mentioned DSCR is for investors. I think there may actually be a stipulation where you can’t be living in the property if it’s a DSCR. But you mentioned the bank statement loans and the non-QM.

Mike Perkins (14:38)
That’s correct. And that’s true also,

with DSCR, it’s also true for a multifamily property. Some people think that they can get a fourplex and live in one of them and do a DSCR, but you can’t be on it at all. You can’t live in any of the units.

Dylan Silver (14:51)
Now,

for these non-QM loans, when folks are trying to understand, how much do I have to put down and what’s the requirements, they’re essentially having to go to the lender and say, what are the requirements for your non-QM loan?

Mike Perkins (15:07)
Yeah,

that’s correct. And what you would do is someone would come to me and they would say, well, I only have 10 % down or only have, you know, whatever, you know, is there anybody that’ll do it? And then you can sit down look at the credit score and you can, you can check. But I mean, as a rule of thumb, they’re going to want 20 % down, but you know, I can’t say that every single lender offering those programs is going to require that because it depends. I’ve seen some too where, you know, it’s like 20 % down up to a certain credit score. And then if it’s more than that, they may want 30 % down. I mean, it can get complicated.

Usually you’re to go to a mortgage broker, somebody like me, and I may check five different people.

Dylan Silver (16:16)
Pivoting here, Mike, ⁓ your YouTube channel is great and you have some mortgage education combined with music. Where did the idea to combine the music with the mortgage education come around?

Mike Perkins (16:24)
That’s correct.

Well,

to begin with, I’m probably the only singer songwriter mortgage loan officer in the world, at least the only one I’ve ever heard of. I also have some experience as a comedic actor. So I thought, well, why not just throw it all together? mean, the mortgage videos have two problems. One, they’re boring. In most cases, they’re pretty darn boring. I mean, it’s not the most exciting and sexy subject to talk about. And, you know, how do you set yourself apart from everybody else? mean, God gives you lemons, you make lemonade. I mean, it happened to be…

songwriter anyway so why not throw it all together you know and that’s what I’ve done. The hard part is writing the song because I to write a song about every loan bro.

Dylan Silver (17:04)
Now, the-

Bonus question here for you. This is really a topic that I’ve seen take off in every segment of the real estate space. AI seems to be on everyone’s mind and they’re trying to implement it. And I’m sure you’re seeing it in music as well with services like Suno. How has AI impacted your business and the way you approach the mortgage space?

Mike Perkins (17:10)
Yeah.

yeah. yeah.

BITTER

I want to be the opposite. You know, mean, if everybody’s going AI, I want to be the non AI guy. I want to be the guy in front of the camera that’s a real human being. mean, you know, once again, to try to set yourself apart, but yeah, I see it all the time. You know, mean, realtors don’t want to show how, so they create a, you know, fake person. go through the hell. I mean, it’s kind of astonishing what AI can

And it’s just getting more and more capable as time goes on. ⁓ You know, I use it to come up with an image, say for a slide, like, you know, this guy holding a bunch of boxes with credit scoring, you know, that

That was an AI picture that I created and I stuck it as a thumbnail. So I mean, even I will use it, but I don’t know. think that if everybody starts going AI and that’s all you see, there’s going to be people out there. want to see a human. You know, I don’t use a teleprompter reader. Okay. When I operate, I mean, I have one, but I don’t use it.

Dylan Silver (18:16)
No question.

We are coming up on time here, Mike, any new projects that you’re working on and then as well, what’s the best way for folks to get in contact with you or your team?

Mike Perkins (18:33)
Well, you can always reach me by email or my cell phone. mean, usually I like people to call me on my cell phone. I mean, I’d be happy to give you the number. It’s 832-755-5424. And I’d be happy to talk to anybody. This is a QR code behind me for the mortgage channel.

Dylan Silver (18:43)
Go ahead, go ahead.

Mike, thank you so much for joining us today. Thank you for your time.