March 16, 2022 • 16 mins
Trey Garcia is a mortgage professional who has been in the business for roughly 7 years. Trey have a background in Mathematics and loves to educate new homeowners about their options and what fits into their budget.
Connect with Trey:
https://www.facebook.com/Trey-Garcia-Union-Home-Mortgage-110153978219517
https://www.uhm.com/tgarcia/
Your hosts: Colton Cockerell & Trisha Stetzel
Click for more about your hosts:
Colton Cockerell
Trisha Stetzel
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Colton Cockerell (00:04):
Hello and welcome to a another exciting
episode of Bridge the Gap wherewe're balancing life through
health, wealth, business andrelationships.
Hello and welcome to the show myname is Colton Cockerell. And
with me, I have my co host who'salways on my ride or I guess
left depending on what thescreener in day by day, versus
(00:25):
that's what's going on.
Trisha Stetzel (00:27):
Yeah. Hey, actually, Colton, I'm above you
in the Brady Bunch squarestoday, just so that you know.
Hey, everyone, welcome to theshow. So glad to have you
listening with us. Just as areminder, this month on the
show, we are hyper focused onfinancial wellness. So today
we're going to be talking aboutloan originating and who better
(00:52):
to come and talk with us abouthome financing. Then Trey Garcia
with Union home mortgage Trey,welcome to the show.
Trey Garcia (00:58):
Thank you guys for having me on the show. Hopefully
I can provide some insight. Ihope
Colton Cockerell (01:03):
you will. So before we jump in, though, I do
want to give a shout out to oursponsor of this show Trey you're
very familiar with them. Andthat is Sharer McKinley Group,
LLC. Great company. Let's goahead and jump in so phrase on
the show because not only is hebeen doing this forever, you
know, writing loans, but he'salso has a master's in
mathematics. So let me startwith this. Whenever people are
(01:26):
actually applying for loan, youusually hear two different types
then those more but the main twoare FHA and conventional. Can
you kind of briefly explain thedifference between the two?
Trey Garcia (01:34):
Sure. On a conventional mortgage, people
have the misconception that thisis not for first time
homebuyers. Typically youassociate FHA loans with first
time homebuyers. Anybody can geta conventional mortgage, it just
has a little bit higherrequirement for a FICO or credit
score, versus an FHA will a lotfor a little bit lower credit
(01:55):
score while having a higher debtto income ratio. There are
advantages and disadvantages toboth programs. Typically, an FHA
is going to have a lowerinterest rate than a
conventional mortgage. But aconventional mortgage with a
higher FICO customer will havean overall lower payment,
despite the higher interest rateon the loan. Not to worry,
Colton Cockerell (02:18):
I want to be right there. Because I think
that's so important because alot of people they focus on why
should I get the lowest interestrate and put the least amount
down. But what you just saidright there. FHA, just because
you have a lower interest ratedoesn't mean you're actually
having a lower monthly payment.
And I'm assuming you're going toPMI and mortgage insurance.
Trey Garcia (02:36):
That is correct. So on an FHA loan, it is flat
across the board, not flat as in$1 amount, but flat is in a
percentage for everybody,regardless of your credit score,
and that is .85% times your loanamount. Unless of course you put
5% down it drops .8% versus aconventional conventional, it's
(02:58):
private mortgage insurance,meaning it's held through a
private company, it could beEssent, Genworth radian, any
number of companies, and that issolely based off of credit score
and DTI.
Colton Cockerell (03:10):
And that is, I think that's interesting,
because a lot of people wheneverthey think of, oh, you know, PMI
mortgage insurance can once Ihit 20%, I'm done. So can you
squash the myth? If you have anFHA loan? Does your mortgage
insurance stop after 20%? debtto equity in the house?
Trey Garcia (03:27):
So that's a trick question. Of course, like always
with mortgages, but it does comeoff after this is important, not
a dollar amount, but 11 years onan FHA mortgage, but only if you
put 10% down on the home.
Otherwise conventional, yes,once you hit that 20% equity
portion, you can petition for itto be removed, it will get
removed automatically. I believeit's at 22%. So technically,
(03:50):
78%, LTV, if you don't ever senda note into your mortgage
company, once you've reachedthat point. It's just it's kind
of tough, because 11 years is along time to have mortgage
insurance, even if you have 10%down on a home. And the other
thing is you're not getting trueequity on an FHA mortgage,
because there's a financedportion of your mortgage
(04:12):
insurance, which is 1.75% thatgets tacked on. So brief
example, if you put one if youput three and a half percent
down on an FHA, you're actuallyonly getting 1.75% equity in the
property at the time ofpurchase, because the rest of
that is financed. Thanks. That'sinteresting.
Trisha Stetzel (04:34):
So, you know, I'm just sitting here listening
to you guys talk all thesenumbers, and it's so
interesting. Anyway, Trey, I'mso glad that you're on the show.
Because, you know, there are somany people in your industry
that don't really know or canexplain the nuts and bolts
behind it right to a lay personand I appreciate the way that
(04:57):
you're the way that you're ableto do that. I am sure this
question comes up all the timeright now what are the interest
rates look like? It's the springof 2020, by the way for our
listeners,
Colton Cockerell (05:08):
and where are they had 22?
Trey Garcia (05:11):
Well, so the best thing I can tell you is right
now they're heading upwards. Andif you want to get a good
indication of where those ratesare going to go, I would
recommend looking at the 10 yearTreasury yield on the bond
market, just pull up YahooFinance, pull up that little
graph, and you'll be able to seewhere rates were and where
they're heading. Right now,there's a slight dip in basis
(05:34):
points, I do imagine that'sgoing to turn back around and go
right back up to where it was.
Currently, it's tough to say anexact rate, because again, with
all the different factors thatgo into an interest rate, credit
score, and all the other kind ofstuff. I wouldn't be surprised
if you saw rates between fourand 5% come in the spring, and
(05:55):
then maybe a little bit higherthan that come later in the
year.
Colton Cockerell (06:04):
And now I want to I don't want to get to try so
hard for the people who aren'tlike huge into numbers like Trey
and I are like nuts. But I wantyou to explain you and I were we
kind of you were talking about astrategy about paying your house
off quickly, might have aslightly higher interest rate.
However, just making instead ofputting a larger downpayment
(06:27):
down, you can actually save abunch of time on the back end
and a bunch of interestpayments, can you go into more
detail what that looks like?
Trey Garcia (06:33):
Sure. Um, so a prime example is somebody First,
there's always a misconception.
Conventional Loan, I gotta have20% down. That's not the case,
bare minimum on first time,homebuyers, 3%. And then 5% is
pretty industry standard on thatpurchase of a primary residence.
But let's say I did have my 20%.
(06:53):
And let's use the scenario of a$200,000 purchase. And I had 20%
to put down. But I qualifiedwith putting just 5% of that you
can actually save, I think whenwe did our numbers, it was about
eight years on the mortgage byjust putting 5% down and
(07:13):
applying the extra 15% directtowards principal over the first
couple years, the amount ofinterest you saved, or would
save in that scenario that wedid, I believe was 70 plus
$1,000. Of interest.
Colton Cockerell (07:27):
That's a large amount and explain why that is
because I think a lot of meets alot of people, people who
probably bought a house don'tunderstand that it's not a level
interest rate. So can you ownthat
Trey Garcia (07:38):
sure interest on a mortgage is going to be front
loaded, meaning like as I makemy payments for the first year,
majority of my principal andinterest payment is going
towards interest. However, if Imake an extra payment, I skipped
down on the amortizationschedule. So basically your
amortization schedule you shouldget from your mortgage company,
your loan officer should be ableto provide it to you. And what
(08:00):
you're going to do is you'regoing to take however much you
plan on putting and subtract itfrom the principal balance, and
you'll see that you skip anumber of lines. And you go to
Line, you know, from one to 10.
Well, the nine lines in betweenor eight lines in between is all
interest that I've skipped.
That's money that I never pay tothe mortgage company, or to the
loan servicer or anything likethat. It's just if I make an
(08:23):
investment of $8,000, but Iskipped $24,000 of interest that
I've you know, basicallyessentially, I've made money on
my money by doing that. Yeah,
Colton Cockerell (08:33):
breaking it down. Like you said, you have
360 mortgage payments right overthe years multiplied by 12.
Right. So you have beginningstarting off, you're going to
have a heavier like 70 80%interest 20% principal, so
you're staying in just ascenario, hey, I have a $2,000
monthly payment. Let's say 16%of that's going or 1,600s going
(08:55):
to interest only 400 is going toprincipal you're saying if you
extra, no 4000 down, you justjumped 10 payments, you actually
almost paid it off pay skipped ayear of payments that I'm
hearing.
Trey Garcia (09:07):
Yeah, it's pretty close to that. I mean, in in
that scenario where you cut offeight years of your mortgage,
that's pretty significant. Withjust in the first year now. Now
I'm down to 22 years remaining,versus if I put the 20% down.
The bad thing is I'm still I'mstill at a 30 year mortgage, I
didn't cut any time off now mypayment is lower. So there are
(09:28):
other factors to consider like,is monthly payment more
important, or is it moreimportant that I save money in
the long run? To me, I likepeople to have money in
reserves. I would prefer thatpeople keep their money wherever
it best suits them, which isusually not with a bank. Usually
not with a mortgage company.
You'd like to get rid of thatnote is as quickly as possible.
(09:48):
And also have some spare cash incase you know incidences do
occur where you need that moneyto if I just spent all my
savings 20% down on a house andI think Get in the, you know,
hot water heater starts leaking.
And now I've got to come outfive grand for repair. Now I've
got to go and jump in and get aloan or something else versus
(10:11):
5%. And now I've got my moneyfor the repair in case I need
it.
Colton Cockerell (10:14):
Yeah, or you already have a nice savings
built up and you want to investthe money. Colton Cockerell with
Sharer McKinley Group I mean,there's some abs.
Trey Garcia (10:20):
Absolutely.
Absolutely. I think that's agreat option to
Trisha Stetzel (10:25):
say our sponsor was today, Colton. Oh, yeah.
It's okay. So, Trey, I'm reallycurious, you know, with the
housing industry, the way thatit's been over the last many
months where people are payingabove asking and sent in some
cases way above asking, they'rereally dipping into that pile of
(10:46):
cash, right, that they wouldlike to put away to pay for the
house. What are you seeing onyour side? Like, what is that?
How is that changing the waymortgages are happening.
Trey Garcia (10:55):
So what we're seeing happen, obviously, is
people paying over list price.
And typically over appraisedvalue, I won't say typically,
but normally the appraisersadjust based off of the market,
but not always, in some cases,people are, you know, biting the
bullet and paying over whateverthat appraised value was in case
of a low value. Unfortunately, Idon't know that home prices are
(11:17):
going to come back down, itlooks like anytime soon, because
we've almost got to this pointin the market. And now with
homes having sold at that value.
It's hard to make a downturnbecause now that's the new norm,
right? Where a home was 200,000.
Now it's 300,000. And theneighborhood supports a
(11:37):
$300,000. Sale, there may besome pushback on you, if
interest rates continue to rise,there may be some pushback on
the, from the buyers on gettingthose values back down. But we
may not see a sharp decline,like I believe it was about two
years ago, all of a suddenhouses went through the roof. I
(11:57):
mean, everybody's value went up.
Because people were sitting athome due to COVID. And they're
like, I would love a pool. Iwould love you know, a bigger
house, I found that I can makemore money. No,
Colton Cockerell (12:13):
no, completely. And I mean, the
interest rates going up. Soundslike I mean, logically, I would
think that that would kind ofhelp reduce prices for housing,
but at the same time, I mean, ifthere's still a such a high
demand for people wanting to buyhouses, you're gonna still see
prices until demand kind oflevels out. People are like,
Okay, I don't want to pay thisfor, you know, a three bedroom,
(12:35):
two bathroom, I mean, it's stillsky's the limit. And it doesn't
look like it's stopping anytimesoon. So let me let me ask you
this. I think a lot of people,they get caught up, especially
if they're buying a new house orsomething like that. I mean,
anybody, whenever you're buyinga house, can you explain what
premium pricing is I thinkpeople don't think that they can
(12:56):
actually get all their closingcosts covered by the mortgage
company at the expense of ahigher interest rate.
Trey Garcia (13:01):
Sure. So a lot of people, typically what you hear,
if somebody says I financed myclosing cost, it could mean a
couple of things. Either one,they refinanced, in which case,
they truly lumped it into a loanamount, or two, well, I guess
there's three, so two, theywould have got premium pricing,
meaning they took a slightlyhigher interest rate to get a
(13:21):
credit back on the loan, or thesales price was increased
slightly in order for the sellerto give an additional credit. So
you have those few scenarios,the premium pricing isn't a bad
option. For some folks, ifyou're short on cash, and you
need it to help with closingcosts, maybe you take a rate of
(13:42):
So let's say that your interestrate was four and a half
percent. And instead you took arate of 5%, you still qualify
for the mortgage, everythingelse still remains the same. But
you get a point in credit. Nowpoint is not the same as an
interest rate, it just, it's abasis point on a loan, which is
(14:03):
1% of your loan amount. So inthe case of a $200,000 home,
you're going to get $2,000towards closing costs due to
that rate increase. It works aslong as you're going to stay in
the house within a set timeperiod, because at some point
that increase in the interestrate is going to cost you more
than the credit that you got.
And that's where I think there'sa little bit deterrent to
(14:24):
premium pricing. But if you knowyou're gonna stay in the house,
and again, you could talk withus about your wonderful
financial advisor, you wouldconsult them on this sort of
thing. You want to make surethat that is financially
responsible and financially, youknow, works for you. Because if
I know my plan is I'm staying inthe house for seven years. And
I've got $2,000 and thedifference in my payment was $25
(14:47):
a month, then yeah, I'm probablygonna take that that credit
because I'm not going to seethat 7000 Or I'm not going to
see that extra cost because I'mselling the home in seven years.
Colton Cockerell (15:00):
So really, if you ever find somebody that
says, hey, if you use my loanofficer or my company, you'll
get we'll give you X percenttowards us, which in reality,
premium pricing, you know, winkwink, hybrid, you're getting the
3%, even though someone can dobetter. So this is why it's so
important to talk to a loanofficer because a good one
(15:21):
because there's so many optionsthat you probably don't know are
available, you will sit down,and you talk about them. So in
closing today, Trey, thank youso much for coming out. And I
just want all of our guests toknow even though Trey did not
give his information out, it isgoing to be on Facebook, it's
going to be in the show notes,wherever you're listening to the
podcast. So he will have allthat out there if you have any
(15:42):
questions. So make sure you tunein next week for another
exciting episode of Bridging theGap will be focused on financial
independence for the month, andwe're gonna be talking to a
special guest so make sure youtune in then. Thanks.
Thanks again for tuning intothis week's podcast. Don't
forget to subscribe and sharethis podcast with the most
important people in your life.
Colton Cockerell with SharerMcKinley Group, LLC is located
(16:02):
at 820 South Friendswood DriveSuite 207 Friendswood, Texas
77546 phone number to281-992-5698. Securities and
investment advisory servicesoffered through NEXT Financial
Group, Inc. member FINRA/SIPCSharer McKinley Group is not an
affiliate of NEXT FinancialGroup, Inc.
Hello and welcome to a another exciting
episode of Bridge the Gap wherewe're balancing life through
health, wealth, business andrelationships.
Hello and welcome to the show myname is Colton Cockerell. And
with me, I have my co host who'salways on my ride or I guess
left depending on what thescreener in day by day, versus
(00:25):
that's what's going on.
Trisha Stetzel (00:27):
Yeah. Hey, actually, Colton, I'm above you
in the Brady Bunch squarestoday, just so that you know.
Hey, everyone, welcome to theshow. So glad to have you
listening with us. Just as areminder, this month on the
show, we are hyper focused onfinancial wellness. So today
we're going to be talking aboutloan originating and who better
(00:52):
to come and talk with us abouthome financing. Then Trey Garcia
with Union home mortgage Trey,welcome to the show.
Trey Garcia (00:58):
Thank you guys for having me on the show. Hopefully
I can provide some insight. Ihope
Colton Cockerell (01:03):
you will. So before we jump in, though, I do
want to give a shout out to oursponsor of this show Trey you're
very familiar with them. Andthat is Sharer McKinley Group,
LLC. Great company. Let's goahead and jump in so phrase on
the show because not only is hebeen doing this forever, you
know, writing loans, but he'salso has a master's in
mathematics. So let me startwith this. Whenever people are
(01:26):
actually applying for loan, youusually hear two different types
then those more but the main twoare FHA and conventional. Can
you kind of briefly explain thedifference between the two?
Trey Garcia (01:34):
Sure. On a conventional mortgage, people
have the misconception that thisis not for first time
homebuyers. Typically youassociate FHA loans with first
time homebuyers. Anybody can geta conventional mortgage, it just
has a little bit higherrequirement for a FICO or credit
score, versus an FHA will a lotfor a little bit lower credit
(01:55):
score while having a higher debtto income ratio. There are
advantages and disadvantages toboth programs. Typically, an FHA
is going to have a lowerinterest rate than a
conventional mortgage. But aconventional mortgage with a
higher FICO customer will havean overall lower payment,
despite the higher interest rateon the loan. Not to worry,
Colton Cockerell (02:18):
I want to be right there. Because I think
that's so important because alot of people they focus on why
should I get the lowest interestrate and put the least amount
down. But what you just saidright there. FHA, just because
you have a lower interest ratedoesn't mean you're actually
having a lower monthly payment.
And I'm assuming you're going toPMI and mortgage insurance.
Trey Garcia (02:36):
That is correct. So on an FHA loan, it is flat
across the board, not flat as in$1 amount, but flat is in a
percentage for everybody,regardless of your credit score,
and that is .85% times your loanamount. Unless of course you put
5% down it drops .8% versus aconventional conventional, it's
(02:58):
private mortgage insurance,meaning it's held through a
private company, it could beEssent, Genworth radian, any
number of companies, and that issolely based off of credit score
and DTI.
Colton Cockerell (03:10):
And that is, I think that's interesting,
because a lot of people wheneverthey think of, oh, you know, PMI
mortgage insurance can once Ihit 20%, I'm done. So can you
squash the myth? If you have anFHA loan? Does your mortgage
insurance stop after 20%? debtto equity in the house?
Trey Garcia (03:27):
So that's a trick question. Of course, like always
with mortgages, but it does comeoff after this is important, not
a dollar amount, but 11 years onan FHA mortgage, but only if you
put 10% down on the home.
Otherwise conventional, yes,once you hit that 20% equity
portion, you can petition for itto be removed, it will get
removed automatically. I believeit's at 22%. So technically,
(03:50):
78%, LTV, if you don't ever senda note into your mortgage
company, once you've reachedthat point. It's just it's kind
of tough, because 11 years is along time to have mortgage
insurance, even if you have 10%down on a home. And the other
thing is you're not getting trueequity on an FHA mortgage,
because there's a financedportion of your mortgage
(04:12):
insurance, which is 1.75% thatgets tacked on. So brief
example, if you put one if youput three and a half percent
down on an FHA, you're actuallyonly getting 1.75% equity in the
property at the time ofpurchase, because the rest of
that is financed. Thanks. That'sinteresting.
Trisha Stetzel (04:34):
So, you know, I'm just sitting here listening
to you guys talk all thesenumbers, and it's so
interesting. Anyway, Trey, I'mso glad that you're on the show.
Because, you know, there are somany people in your industry
that don't really know or canexplain the nuts and bolts
behind it right to a lay personand I appreciate the way that
(04:57):
you're the way that you're ableto do that. I am sure this
question comes up all the timeright now what are the interest
rates look like? It's the springof 2020, by the way for our
listeners,
Colton Cockerell (05:08):
and where are they had 22?
Trey Garcia (05:11):
Well, so the best thing I can tell you is right
now they're heading upwards. Andif you want to get a good
indication of where those ratesare going to go, I would
recommend looking at the 10 yearTreasury yield on the bond
market, just pull up YahooFinance, pull up that little
graph, and you'll be able to seewhere rates were and where
they're heading. Right now,there's a slight dip in basis
(05:34):
points, I do imagine that'sgoing to turn back around and go
right back up to where it was.
Currently, it's tough to say anexact rate, because again, with
all the different factors thatgo into an interest rate, credit
score, and all the other kind ofstuff. I wouldn't be surprised
if you saw rates between fourand 5% come in the spring, and
(05:55):
then maybe a little bit higherthan that come later in the
year.
Colton Cockerell (06:04):
And now I want to I don't want to get to try so
hard for the people who aren'tlike huge into numbers like Trey
and I are like nuts. But I wantyou to explain you and I were we
kind of you were talking about astrategy about paying your house
off quickly, might have aslightly higher interest rate.
However, just making instead ofputting a larger downpayment
(06:27):
down, you can actually save abunch of time on the back end
and a bunch of interestpayments, can you go into more
detail what that looks like?
Trey Garcia (06:33):
Sure. Um, so a prime example is somebody First,
there's always a misconception.
Conventional Loan, I gotta have20% down. That's not the case,
bare minimum on first time,homebuyers, 3%. And then 5% is
pretty industry standard on thatpurchase of a primary residence.
But let's say I did have my 20%.
(06:53):
And let's use the scenario of a$200,000 purchase. And I had 20%
to put down. But I qualifiedwith putting just 5% of that you
can actually save, I think whenwe did our numbers, it was about
eight years on the mortgage byjust putting 5% down and
(07:13):
applying the extra 15% directtowards principal over the first
couple years, the amount ofinterest you saved, or would
save in that scenario that wedid, I believe was 70 plus
$1,000. Of interest.
Colton Cockerell (07:27):
That's a large amount and explain why that is
because I think a lot of meets alot of people, people who
probably bought a house don'tunderstand that it's not a level
interest rate. So can you ownthat
Trey Garcia (07:38):
sure interest on a mortgage is going to be front
loaded, meaning like as I makemy payments for the first year,
majority of my principal andinterest payment is going
towards interest. However, if Imake an extra payment, I skipped
down on the amortizationschedule. So basically your
amortization schedule you shouldget from your mortgage company,
your loan officer should be ableto provide it to you. And what
(08:00):
you're going to do is you'regoing to take however much you
plan on putting and subtract itfrom the principal balance, and
you'll see that you skip anumber of lines. And you go to
Line, you know, from one to 10.
Well, the nine lines in betweenor eight lines in between is all
interest that I've skipped.
That's money that I never pay tothe mortgage company, or to the
loan servicer or anything likethat. It's just if I make an
(08:23):
investment of $8,000, but Iskipped $24,000 of interest that
I've you know, basicallyessentially, I've made money on
my money by doing that. Yeah,
Colton Cockerell (08:33):
breaking it down. Like you said, you have
360 mortgage payments right overthe years multiplied by 12.
Right. So you have beginningstarting off, you're going to
have a heavier like 70 80%interest 20% principal, so
you're staying in just ascenario, hey, I have a $2,000
monthly payment. Let's say 16%of that's going or 1,600s going
(08:55):
to interest only 400 is going toprincipal you're saying if you
extra, no 4000 down, you justjumped 10 payments, you actually
almost paid it off pay skipped ayear of payments that I'm
hearing.
Trey Garcia (09:07):
Yeah, it's pretty close to that. I mean, in in
that scenario where you cut offeight years of your mortgage,
that's pretty significant. Withjust in the first year now. Now
I'm down to 22 years remaining,versus if I put the 20% down.
The bad thing is I'm still I'mstill at a 30 year mortgage, I
didn't cut any time off now mypayment is lower. So there are
(09:28):
other factors to consider like,is monthly payment more
important, or is it moreimportant that I save money in
the long run? To me, I likepeople to have money in
reserves. I would prefer thatpeople keep their money wherever
it best suits them, which isusually not with a bank. Usually
not with a mortgage company.
You'd like to get rid of thatnote is as quickly as possible.
(09:48):
And also have some spare cash incase you know incidences do
occur where you need that moneyto if I just spent all my
savings 20% down on a house andI think Get in the, you know,
hot water heater starts leaking.
And now I've got to come outfive grand for repair. Now I've
got to go and jump in and get aloan or something else versus
(10:11):
5%. And now I've got my moneyfor the repair in case I need
it.
Colton Cockerell (10:14):
Yeah, or you already have a nice savings
built up and you want to investthe money. Colton Cockerell with
Sharer McKinley Group I mean,there's some abs.
Trey Garcia (10:20):
Absolutely.
Absolutely. I think that's agreat option to
Trisha Stetzel (10:25):
say our sponsor was today, Colton. Oh, yeah.
It's okay. So, Trey, I'm reallycurious, you know, with the
housing industry, the way thatit's been over the last many
months where people are payingabove asking and sent in some
cases way above asking, they'rereally dipping into that pile of
(10:46):
cash, right, that they wouldlike to put away to pay for the
house. What are you seeing onyour side? Like, what is that?
How is that changing the waymortgages are happening.
Trey Garcia (10:55):
So what we're seeing happen, obviously, is
people paying over list price.
And typically over appraisedvalue, I won't say typically,
but normally the appraisersadjust based off of the market,
but not always, in some cases,people are, you know, biting the
bullet and paying over whateverthat appraised value was in case
of a low value. Unfortunately, Idon't know that home prices are
(11:17):
going to come back down, itlooks like anytime soon, because
we've almost got to this pointin the market. And now with
homes having sold at that value.
It's hard to make a downturnbecause now that's the new norm,
right? Where a home was 200,000.
Now it's 300,000. And theneighborhood supports a
(11:37):
$300,000. Sale, there may besome pushback on you, if
interest rates continue to rise,there may be some pushback on
the, from the buyers on gettingthose values back down. But we
may not see a sharp decline,like I believe it was about two
years ago, all of a suddenhouses went through the roof. I
(11:57):
mean, everybody's value went up.
Because people were sitting athome due to COVID. And they're
like, I would love a pool. Iwould love you know, a bigger
house, I found that I can makemore money. No,
Colton Cockerell (12:13):
no, completely. And I mean, the
interest rates going up. Soundslike I mean, logically, I would
think that that would kind ofhelp reduce prices for housing,
but at the same time, I mean, ifthere's still a such a high
demand for people wanting to buyhouses, you're gonna still see
prices until demand kind oflevels out. People are like,
Okay, I don't want to pay thisfor, you know, a three bedroom,
(12:35):
two bathroom, I mean, it's stillsky's the limit. And it doesn't
look like it's stopping anytimesoon. So let me let me ask you
this. I think a lot of people,they get caught up, especially
if they're buying a new house orsomething like that. I mean,
anybody, whenever you're buyinga house, can you explain what
premium pricing is I thinkpeople don't think that they can
(12:56):
actually get all their closingcosts covered by the mortgage
company at the expense of ahigher interest rate.
Trey Garcia (13:01):
Sure. So a lot of people, typically what you hear,
if somebody says I financed myclosing cost, it could mean a
couple of things. Either one,they refinanced, in which case,
they truly lumped it into a loanamount, or two, well, I guess
there's three, so two, theywould have got premium pricing,
meaning they took a slightlyhigher interest rate to get a
(13:21):
credit back on the loan, or thesales price was increased
slightly in order for the sellerto give an additional credit. So
you have those few scenarios,the premium pricing isn't a bad
option. For some folks, ifyou're short on cash, and you
need it to help with closingcosts, maybe you take a rate of
(13:42):
So let's say that your interestrate was four and a half
percent. And instead you took arate of 5%, you still qualify
for the mortgage, everythingelse still remains the same. But
you get a point in credit. Nowpoint is not the same as an
interest rate, it just, it's abasis point on a loan, which is
(14:03):
1% of your loan amount. So inthe case of a $200,000 home,
you're going to get $2,000towards closing costs due to
that rate increase. It works aslong as you're going to stay in
the house within a set timeperiod, because at some point
that increase in the interestrate is going to cost you more
than the credit that you got.
And that's where I think there'sa little bit deterrent to
(14:24):
premium pricing. But if you knowyou're gonna stay in the house,
and again, you could talk withus about your wonderful
financial advisor, you wouldconsult them on this sort of
thing. You want to make surethat that is financially
responsible and financially, youknow, works for you. Because if
I know my plan is I'm staying inthe house for seven years. And
I've got $2,000 and thedifference in my payment was $25
(14:47):
a month, then yeah, I'm probablygonna take that that credit
because I'm not going to seethat 7000 Or I'm not going to
see that extra cost because I'mselling the home in seven years.
Colton Cockerell (15:00):
So really, if you ever find somebody that
says, hey, if you use my loanofficer or my company, you'll
get we'll give you X percenttowards us, which in reality,
premium pricing, you know, winkwink, hybrid, you're getting the
3%, even though someone can dobetter. So this is why it's so
important to talk to a loanofficer because a good one
(15:21):
because there's so many optionsthat you probably don't know are
available, you will sit down,and you talk about them. So in
closing today, Trey, thank youso much for coming out. And I
just want all of our guests toknow even though Trey did not
give his information out, it isgoing to be on Facebook, it's
going to be in the show notes,wherever you're listening to the
podcast. So he will have allthat out there if you have any
(15:42):
questions. So make sure you tunein next week for another
exciting episode of Bridging theGap will be focused on financial
independence for the month, andwe're gonna be talking to a
special guest so make sure youtune in then. Thanks.
Thanks again for tuning intothis week's podcast. Don't
forget to subscribe and sharethis podcast with the most
important people in your life.
Colton Cockerell with SharerMcKinley Group, LLC is located
(16:02):
at 820 South Friendswood DriveSuite 207 Friendswood, Texas
77546 phone number to281-992-5698. Securities and
investment advisory servicesoffered through NEXT Financial
Group, Inc. member FINRA/SIPCSharer McKinley Group is not an
affiliate of NEXT FinancialGroup, Inc.
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