July 9, 2024 • 33 mins
In Episode 45, Dennis Day and Judy Gratton will help you unlock the secrets to navigating the complex world of home loan interest rates with our special guest, Steve O'Donnell from CMG Financial. This episode promises to transform your understanding of mortgage rates by focusing on what truly matters—the monthly payments. Hear Steve’s expert take on how global events and the bond market impact these rates, and learn practical strategies like qualifying with a rate cushion and innovative options such as "lock and shop" for buyers and special rate lock opportunities for sellers.
Tired of the confusion surrounding jumbo and conventional loans? We've got you covered. Steve breaks down the distinctions between these options, shedding light on loan limits across various counties and the waning appeal of adjustable-rate mortgages (ARMs). Discover creative financing strategies like bundling first mortgages with second equity loans and understand the critical steps of pre-qualification and pre-approval. Whether you're looking to buy, refinance, or downsize, this episode offers invaluable insights to help you make informed decisions.
Planning to downsize or manage your home equity for long-term stability? Steve provides a comprehensive guide on calculating home equity and cash flow, considering retirement plans and liquid assets. We discuss the benefits of bridge loans, home equity lines of credit, and programs like rate rebound refinancing. From handling fluctuating interest rates to seeking personalized financial advice, this episode equips you with the knowledge needed to navigate today’s volatile housing market. Join us for a wealth of expert advice and actionable strategies to optimize your home financing journey.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Okay, welcome everyone.
This is Getting your Edge Outto Right Size your Home and Life
podcast.
I'm your co-host, dennis Day ofthe fabulous Edge Group team
powered by EXP.
I'm with my co-host, judyGratton.
Happy 4th of July, and so on.
Judy, did you have a good day?
Speaker 2 (00:17):
I did.
I had a wonderful 4th of July.
I went to the Bothell MainStreet Parade.
We put our chairs out atmidnight on June 30th.
We do that every year so we canhave a seat.
Speaker 1 (00:28):
And our guest today is Steve O'Donnell, a mortgage
broker with CMG, and he's hereto talk about interest rates,
mortgages and all that goodstuff.
So, steve, let's start off.
Tell us who you are and whatyou do and who you work for.
Speaker 3 (00:48):
Well, I'm with a company called CMG Financial or
CMG Home Loans and we're basedright here in Mill Creek If
anyone knows Mill Creek TownCenter, we're right down there
and I've been.
Let's see, I originated myfirst mortgage, I think, in 1995
.
So pretty much what's thatsaying?
I've seen it all.
So I've seen the ups and thedowns and the good and the bad,
(01:11):
and there's always, every time Ithink I have it all learned or
know everything they change therules anyway.
So the one thing I pledge isyou know, with the changes all
the time and everything is, eventhough I've been lending many
years is I will always do mybest to get the right answer for
every client.
Speaker 1 (01:26):
What's going on in the mortgage industry right now?
What are interest rates?
Speaker 3 (01:31):
Well, you know they've been pretty volatile.
But a lot of times people thinkrate is the most important
thing to discuss and to me themost important thing is the
payment.
So I always try to make surethat the payment fits the client
, not the interest rate, becauserates will change, but the
payment is what you want to theclient to carry.
Right now, the standard 30 yearfixer in the mid to upper 60s,
(01:52):
you know which.
Historically that's a good rate.
In the recent, like last 10years People are like, oh,
that's really high, but it'sreally not a bad rate
historically If you look atthrough the last 30 years.
I guess that's pretty much it.
With the interest rates,they're pretty volatile this
week and I know that you knowwhen we talk volatility
sometimes that's the differenceof getting a credit to buy down
(02:13):
the rate a little bit or payinga little bit to buy it to the
point where the client's mostcomfortable.
Speaker 2 (02:19):
Kent, what do you mean?
It's volatile.
Can you kind of give us alayman's term of why it's
volatile?
What's happening?
Speaker 3 (02:28):
Well, a lot of things that happen in the world can
affect mortgage prices.
It's primarily driven by themortgage-backed securities
market, which is tied to thebond markets, and I'm not an
expert in those.
I mean I watch the experts, Ihear their predictions.
In those, I mean I watch theexperts, I hear their
predictions and, you know,sometimes politics plays a role
in that.
I mean, it's things that Ialways say the rate is something
(02:50):
we don't control, but you know,we can kind of try to time it a
little bit, but in reality, ifsomeone is buying and the rate
is at a higher point, wellthere's a higher likelihood that
they're going to be able toimprove their rate in the future
with a refinance.
True, true.
Speaker 2 (03:08):
So when someone is considering buying a home and
the interest rates, if they'revolatile, they shift frequently,
right it's, you know, you don'tknow, from day to day it could
go up a quarter of a point,which can make a significant
difference in their purchasingpower.
So how do we, you and I andDennis, how do we keep our
(03:33):
clients informed about thatinterest rate if it means a
difference between them beingable to buy what they want and
not?
Speaker 3 (03:41):
When someone is looking for a home, I usually
like to qualify them at acomfortable point to where we
have a little cushion.
So if the rate does go up alittle bit then they have the
option of either buying it downor we already factored that in
with their pre-approval.
Once they're under contract,then it's smart to lock in at
(04:01):
the time that the rate iscomfortable for them.
Then it's smart to lock in atthe time that the rate is
comfortable for them.
You know there's differentclients will have different
levels of expertise in watchingthe financial markets and I
don't tell someone when to lock.
I can give a recommendation butit's their choice.
Speaker 2 (04:17):
Is there anything like lock and shop anymore or no
?
Speaker 3 (04:20):
There is.
I haven't really had anyone usethat recently.
There's some options forsellers as well, where they can
lock in a rate to sell a homeand I'm learning on that.
So that's something that youand I can talk offline about if
you have an interest, and that'stypically used for a home that
maybe has sat on the market fora little bit, where a seller can
(04:41):
purchase a rate for an extendedperiod that their buyers can
use.
So that's something new to me,but it is something I learned a
little bit about last week.
So that's on the seller side ifit's a home that's not moving.
So if the homes are selling intwo or three days, there's no
reason for, or even two or threeweeks.
There's no reason for a sellerto consider that that's more for
(05:03):
a home that's maybe sat forthree weeks or four weeks and
not getting a lot of interest,than the seller can advertise a
lower interest rate.
Speaker 1 (05:10):
I had not heard of that.
That's really interesting.
Speaker 2 (05:13):
I think that's cool.
Speaker 3 (05:14):
Yeah, depending on the market or the home, the
individual home being sold.
Speaker 2 (05:20):
I mean they just think they go to a lender and
they go to their bank and theyget a loan.
They don't understand there areso many working parts that can
affect what that loan is, whatthe interest rate is, how it's
structured, how long it is.
I mean it's just there's somany working parts.
It's really important.
I always encourage buyers andparticularly to touch base with
(05:44):
their lender before they startlooking for a home.
Speaker 3 (05:47):
Well and that's the thing with a lot of your
standard credit unions and banksthey're going to have the
standard products and that willfit many people, but at the same
time, a lot of times a mortgagelender such as myself may have
products or better rates thanwhat the banks and credit unions
have, depending on the property, the purchase price, the
(06:11):
client's individual creditscores and that sort of thing.
So experience does play a role,the same as for you and Dennis
with selling or buying.
The level of experience for areal estate agent makes a big
difference for a buyer or aseller.
Speaker 1 (06:24):
We kind of built our business around downsizers and
we hear this well, I've got this3% interest rate.
I want to move but I can't giveup that rate because the
interest rates are so high.
Do you have an answer for?
Speaker 3 (06:38):
folks like that.
That's actually one of thethings that's created.
A little bit of the issue inthe real estate market is
because there's not a lot ofpeople listing their homes
because they're tied to a rate.
Now each individual's situationis going to be different
depending on like you'rebringing up people that are
looking at downsizing.
A lot that will come into playwith that is well, how much
(06:59):
equity do they have?
A lot of people downsizingmight be able to sell and pay
cash for something, which me, asa lender, I think that's
fantastic.
The catch on that, though, isthey need to sell before they
buy, so how can they do that?
If there's no finance, you knowthey're not getting a mortgage.
And one thing that I'verecommended to people in my
(07:20):
years as a bank manager I was ata larger bank, I won't name it,
but but basically, I had manyclients.
If they owned their home freeand clear or had a lot of equity
, set up a home equity line ofcredit with a significant
balance available.
That way, they could possiblypay cash for a home or do a
significant down payment as abridge loan without having their
(07:43):
house sold first.
Now you can't really do that ifyou're planning on selling in
the next short-term period Imean in each equity loan product
or equity line of creditproducts going to have different
rules on it.
So that's something for someoneto do now if they're thinking
about moving in three to fiveyears.
So, outside of that, if someoneis looking at downsizing right
(08:06):
now, I have some incredibleproducts that I'm not going to
get into all the nuts and boltsof them.
But I have one product wherepeople can borrow from the
equity of their current home.
It will make their mortgagepayment for six months out of
part of that equity and thenthat can be used as a down
payment.
So you're not having twomortgage payments and it gives
(08:27):
you six months to sell your home.
So that's I mean, that's justan example of a bridge loan
option that isn't that scary andactually how that product
actually works is if the househasn't sold within the six
months, then there's an agreedupon price up front that that
equity company actuallypurchases the home.
So it's completely risk-free.
(08:48):
But it's not going to be asprobably as profitable as you
and Judy selling the home forthem within that six months.
Speaker 1 (08:55):
That sounds like a great option.
The adjustable rate mortgagesused to be cheaper.
I mean they were a good buy.
Are they still a good buy?
Speaker 3 (09:05):
I have not seen any adjustable rates that have
really stood out in a long time,ever since the rates went down
in the twos and threes.
Ever since then I've never seenit.
I have not done an adjustablerate mortgage in years.
I used to do a lot of them whenthe mortgage rates were in the
eights, sevens, eights, and thenthey'd have an adjustable rate
(09:25):
at five or whatever.
But will they come back?
I don't know, because that's aninvestor-driven product.
I'm assuming that the investorsthat buy mortgage-backed
securities are looking at itgoing.
Their margin isn't enough forwhat they want to profit,
because the average 30-yearfixed is not held for that long
anyways, based on the amount oftime that people stay in homes,
(09:47):
not expecting to see anyincredible adjustable rates in
the near future, sometimes withjumbo rates though.
So if someone's buying in thejumbo market in the one and a
half, 2 million $3 million range, those are driven based on
private investors and so thosecould have some adjustable rate
options.
That's something that, onceagain, is on an individual basis
(10:08):
, based on the client that'sbuying.
And you were talking aboutdownsizing.
Typically, people don'tdownsize, or jumbo loan home, I
guess, would be the term.
Speaker 2 (10:18):
Well, now I know the jumbo loans have adjusted over
the years as to where you landto become a jumbo loan.
Speaker 3 (10:27):
It varies by county.
So the national conforming loanlimit is $766,550.
But within King Pierce andSnohomish County that is a
higher limit.
Speaker 2 (10:39):
And that means anything above that is then
referred to as a jumbo loan.
Speaker 3 (10:44):
Correct and depending on where conventional loans are
at and jumbo loans.
Sometimes jumbo loans are moreattractive than conventional
loans, sometimes they're not.
If they're not, then what alender can also do is structure
it where you keep the firstmortgage in a conventional and
then you do a second equity loanand you bundle it into two
(11:08):
loans for the client.
That way they minimize theirinterest expense.
Speaker 2 (11:13):
The reason I'm asking is that so many of the outlying
areas in Western Washingtonanymore are getting higher and
higher, where a million dollarsis kind of your average price
Loan limits in King Pierce andSnohomish County are $977,500.
Speaker 3 (11:30):
And then that can vary to the other counties, like
Spokane and stuff like that aregoing to be at $766,550.
Now it does also vary based onthe number of units.
So if someone's buying a duplex, a triplex or a fourplex, then
that can be higher balances andstill be a conventional as well.
Like a duplex would be1,251,400.
It would stick within theconventional and so forth.
(11:54):
So the triplex and fourplexwill be higher.
Speaker 2 (11:57):
So that's.
I mean it's good for people tounderstand that, that they jump
into a different type of loanproduct at that level.
And sometimes it can be better,you say, and sometimes it isn't
as good, and so then you haveto become even more creative.
Speaker 3 (12:15):
Right, and if someone goes to the bank or the credit
union, they're going to have oneoption for a jumbo, whereas a
mortgage lender such as myselfhave probably 20 different
investors.
So that's the nice thing as faras the difference between the
banks and the mortgage companiesis.
A lot of times the mortgagecompanies have a lot of options
that don't necessarily fit thestandard customer, like I did a
(12:38):
bank statement loan for agentleman where we used his cash
flow to qualify him instead ofhis tax returns.
So there's lots of differentoptions and that's why I always
recommend, before you and Dennistake someone touring houses,
make sure that they know whatthey are looking for, because
anyone can go out and look at ashiny new house or big,
(13:00):
beautiful house and fall in lovewith it and then find out that
that's well above their budget,or well below their budget
sometimes.
Speaker 2 (13:06):
We recommend that immediately, that you know
that's one of the firstquestions have you spoken with a
lender?
And then our goal is to try andhave them fully underwritten as
quickly as possible so thattheir lender approval letter is
strong, not just a pre approval.
Speaker 3 (13:27):
Correct.
There's three different levelsof a pre-qualify or pre-approval
.
There's a pre-qualify that justbasically means that the lender
feels like they should qualifyat purchasing that particular
price point.
And then there's what we callan AUS, or automated
underwriting approval, whichmeans that the decisioning
(13:48):
engine the way I look at that,it's as good as the information
that was input.
So if someone overstated theincome or assets, then it may
not be a valid approval, but ifit's accurate, with pay stubs or
tax returns and bank statementsand also we do have a credit
report on that so an AUSpre-approval is typically
(14:11):
accepted and considered strongenough for most offers.
And then if you have someonethat has, that's self-employed
or has variable income, I highlyrecommend doing a fully
underwritten pre-approval whichis no cost or obligation to the
client.
And that's what I tell all myclients that coming and talking
(14:31):
to me costs you nothing.
And if we do a pre-approvalthere's no cost.
If you use my pre-approvalletter, there's no obligation I
mean.
So basically I'm a very lowpressure person that just wants
people to learn and make surethat they make the right
decision for the home that theybuy.
Speaker 2 (14:50):
So if someone comes to you and they tell you that
their goal is to downsize fromthe home that they're in into
something maybe smaller, theyhave good equity in their home,
so they have the cash for eithera good down payment, possibly
even pay it off, but a loan theywant to know is a loan a good
(15:10):
idea.
Should I buy the rate down withsome of that money versus
putting it all down as a downpayment?
What would you say to someonein a situation like that?
Speaker 3 (15:21):
The first thing I usually ask is have you already
consulted a real estate agent tosee what you think your home is
worth?
Because many times people willgreatly overstate or understate
the value of their home andhaving an experienced agent such
as you and Dennis would make memore comfortable calculating
out what their equity availablein that home is.
(15:43):
So once we know what the equityis, then I look at what their
monthly cash flow is fromretirement social security.
Maybe they're still working,but if they're still working,
maybe they're retiring in one tothree years.
So I take that into account.
What their cash flow will bewhen they retire.
That's for me personally, tomake sure that someone will
(16:04):
always be comfortable in theirhome.
Then, also, depending on whattheir liquid assets are, as far
as investments and bank accountsand that sort of thing, I mean
sometimes people don't have any,sometimes people have a lot.
All that goes into my thoughtprocess about what I recommend
for that client when they'redownsizing.
I mean typically the reasonsfor downsizing are economic or
(16:28):
health.
I mean as far as like.
Well, I guess a good example ismy wife keeps bringing up about
how eventually she wants tohave a ranch house instead of a
two-story house, because goingup and down stairs that can
determine what type of houseyou're buying.
And then the next mostimportant thing is the area, and
so once we kind of get thatfigured out, then we know a
price point and then I work itinto to make sure that they're
(16:50):
comfortable with the payment.
As far as what I brought upbefore about the bridge loan
option, I mean there's manydifferent ways to downsize.
You can sell, then buy, you cando a bridge loan, you can have
a home equity line of credit setup ahead of time.
Sometimes people have enoughcash that they can qualify with
buying a new mortgage and theystill sell their house after the
(17:13):
fact.
I've had many clients do that.
Everyone's got a differentsituation.
That's why I was saying thebest recommendation I have is to
sit down with a lender thatyou're comfortable with, that
you feel like has the experienceto come up with a plan Are
there special ways that somebodycan buy down this high what we
consider now a high interestrate.
(17:34):
Well, there's always the optionof buying down the interest rate
, which you know.
The common term is, that is,paying points.
It has not been common forpeople to pay a bunch of points
because a lot of times thosefunds can be used for having a
smaller mortgage or helpingcover the closing costs and down
payment.
It's on an individual basis.
If someone's going to get intoa mortgage and carry that
(17:56):
mortgage for long-term, thenpaying points is worth it
because there's a break-evenpoint based on the amount that
you pay compared to the savingsand the payment.
I guess the answer to this Danasays there isn't one answer.
It depends on that person'ssituation and if someone plans
on doing a big lump sum, paydown on it after selling their
(18:17):
current residence, for instance.
You don't want to pay a bunchof points on a larger mortgage
to have a smaller mortgage afterthe fact.
Yes, you can buy the interestrate down.
You can also refinance.
In the future.
We have what's called the raterebound, which basically CMG
waives all lender fees and gives$1,000 credit towards
third-party fees such as titleand escrow and appraisal.
(18:39):
That's a common thing thatpeople are looking at now is
that they're going to buy nowwith the expectation that
sometime in the next six months,two years, whatever they will
refinance and drop theirinterest rates, so we can do
that at close to no cost.
Speaker 2 (18:54):
Is there a time limit , like how long they have to
hold on to the original loan orhow I believe it's a six month.
Speaker 3 (19:02):
Let me I actually have that up there.
I believe it's six months ofthat.
They have made six paymentsbefore they refinance and then
that offer is good for fiveyears.
Speaker 2 (19:14):
Oh, good Okay.
Speaker 1 (19:15):
Five years.
Okay, that's pretty strongoffer.
Do you expect that we'll seeany significant rate drop in
this calendar year?
Speaker 3 (19:29):
You know, the funny thing with that question, dennis
, is I watch a lot of experts ontheir daily podcasts, that sort
of thing, and I have a sayingthat the experts, if they're
right, 50% of the time they'redoing pretty good.
Now, in my opinion, I dobelieve that there will be a
rate drop as it gets closer tothe election, but that's not
(19:51):
necessarily any guarantee oranything like that.
It's just I think that thereare political moves that happen
to push rates down, so I don'tknow if that will be the case or
not.
But you know, there's also alot of factors, such as
inflation, things that happen inother to drop and drop and drop
(20:11):
, and they really haven't.
Honestly, the fact that therates dropped so low during 2020
(20:36):
and 2021 was wonderful for thepeople that refinanced and
people selling at that point,because it pushed prices up up.
But it's created a little bitof a conundrum now, because now
you have people that bought at ahigher price with lower
interest rate, trying to sell topeople that will have a higher
interest rate.
Speaker 2 (20:56):
There's always something to the yang.
It always, you know it'swhatever it is.
If it's good now, there'sprobably going to be a downside.
But I, you know, I frequentlytell people that those rates
were a result of a nationalcatastrophe.
The COVID pandemic To get arate like that is generally the
(21:18):
result of a national catastropheand I really personally would
not like to see us in any morenational catastrophes.
Speaker 3 (21:26):
Exactly exactly.
So.
If the rates, if inflation, isin check and people are buying
and selling homes on a regularbasis, I mean, that's part of
the issue right now has been thelower inventory has kept prices
up, which is great for sellersbut not so great for buyers,
right, I like to see an evenmarket where the buyers and
(21:48):
sellers are pretty even outthere.
Then that to me is a little bitmore fair.
And then the interest rates aretypically pretty stable at that
point.
And when I say stable, thatstable might be six, it might be
five, it might be eight, I mean, but it fits the economic
situation of the country at thatpoint, based on wages and that
(22:10):
sort of thing.
Speaker 1 (22:11):
Are you seeing a slowdown in new construction
because of the high interestrates?
Speaker 3 (22:18):
Not at all.
I mean, from just being aconsumer myself and a citizen
driving around, I see lots ofnew construction builds going
out and many of the people in myoffice here have builder
relationships and they're doinga lot of mortgages, so I don't
think that the builders arehaving any issues with selling
(22:39):
their properties right noweither.
Speaker 1 (22:41):
Okay, we have a severe shortage of homes, and
the only way to alleviate thatis to build more homes.
Speaker 3 (22:48):
So Well, and I'm seeing plenty of multifamily
like apartment buildings andstuff like that being built too.
So there I mean, there's newhomes for purchase, but then
there's also many new homesgoing up for renters which those
renters would hope to behomebuyers.
But not everyone is alwayspositioned to be a homebuyer and
that's, once again, is probablygetting above my level of
(23:10):
economic experience.
But I worked with a builderlast year, built 48 townhomes
and it started off gangbusterswhere they're getting four and
five offers in every home.
Then the last few buildings.
All of a sudden there was a bigslowdown and the rates had
actually gone down a little bit.
So it wasn't necessarily ratedriven, it was just the time of
year, I think.
They all sold and they all soldfor significantly higher
(23:33):
towards the end than what theysold for at the beginning.
So we did see a consistentincrease in prices throughout
the sale of the 48 units.
Speaker 1 (23:42):
So if we're looking to buy.
How do we improve that creditscore?
Speaker 3 (23:46):
Well, the first thing I recommend is knowing what
your credit score is and ifthere really is an issue.
I've had many people think thattheir credit is fine when it
wasn't, or, on the reverse,where they thought that they had
something, that their creditwas terrible and it was fine.
So I can do a soft pull creditcheck which basically doesn't
hit your credit as the same asapplying for a car loan, credit
(24:08):
card or even a mortgage, and itgives me one score with
TransUnion.
It gives me the entire reportas far as collections balances,
all the information I need to beable to advise, and we can do
what-if scenarios, which, let'ssay, if someone's at a 590
credit score and they need to beat a 620, I can do a what if
(24:29):
scenario that says, ok, if I dothis and this, your score will
move to here, and that's allautomated through the credit
reporting agencies that wecontract with, and so I've done
that a lot of times for peopleto help with their to get them
qualified.
Sometimes it can be doneinstantly.
You'll pay down this balancefrom 500 down to $10.
(24:52):
And all of a sudden, theirscore jumps up 20 points.
There's a lot of little tricksthat we have in the industry
that can help people purchasesooner and hopefully that helps
a little bit there.
I mean, because there'sdifferent things.
There's the debt to incomeratio.
So sometimes I'm advisingpeople instead of putting down
(25:13):
50% on your down payment, whydon't you do 20% and get rid of
all these car loans and boatloans and stuff like that?
So once again, it comes down toanalyzing each individual home
buyer's financial situation andgiving my advice.
Speaker 2 (25:31):
So you're kind of a counselor too.
Speaker 3 (25:34):
Well, that's what I've always enjoyed.
I mean, I was a bank managerfor many years and I always like
to look at the total financialpicture for someone, not just
hey, can I slam them in a loan.
Now, if the client isn'tinterested in my advice, that's
fine too.
I mean, many clients that Ihave have a higher level of
education and expertise than Iwould in the financial world.
(25:54):
I mean, I've worked withfinancial advisors and actually
financial advisors are actuallysome of my best referral sources
because they appreciate myadvice.
I won't say which company, buta financial advisor company
that's local.
I have three different gentlementhat have referred me clients
not because they're buying ahouse but because they're going
(26:14):
to withdraw a huge amount oftheir retirement to pay off
their mortgage when they retired.
And they wanted me to kind ofexplain to them that there was
some benefits to carrying themortgage, depending on the
balance, if there could be a taxbenefit.
But it was going to be a hugetax implication for the majority
of these people closing outretirement and or investments
(26:38):
that would have significantcapital gains, pushing them into
a higher tax bracket.
So, hearing it from me when Iwasn't trying to talk them into
doing a mortgage.
I had nothing to do with doinga new mortgage.
I think helped in each of thosecases them retain the client's
funds, which saved that clientthose clients tens of thousands
of dollars that they would havehad to pay to the IRS.
(27:00):
I have a saying you don't haveto have your house paid off to
retire, you just have to haveenough eggs in your basket.
Speaker 2 (27:07):
And sometimes it's better not to have the house
paid off.
I know I have a client and theywere like, yeah, we're going to
pay cash for a house.
And I'm like, before you dothat, you need to talk to a
lender, you need to weigh theoptions so you make an informed
decision for what's best for you.
Speaker 3 (27:26):
Right, and I usually recommend talking to a lender, a
financial advisor and a CPA.
Speaker 2 (27:32):
The importance of sitting down with Steve or
someone like Steve andunderstanding what it is you're
doing, because it is acomplicated business.
It's not one size fits all andI think a lot of people think
it's one size fits all and itisn't.
Speaker 3 (27:50):
You know, having a level of trust.
I mean, obviously your clientswholly trust both of you and I
want my clients to trust me.
The majority of my businesscomes from past clients.
I just had a email come in justa few minutes ago from a client
that he bought his first homewith me 10 years ago and and he
was looking at getting my adviceon turning that house into a
(28:14):
rental and buying another home.
Well, the first thing I'm goingto do is probably recommend him
having a conversation with thetwo of you on, first and
foremost, you turn a owneroccupied home into a rental and
then you keep it as a rental toolong you just turn that into.
You lost the tax benefit ofselling a home tax-free with the
(28:37):
exemption.
So the fact of him doing that,yes, he could get some added
equity by holding onto the home,but at the same time it might
cost him a lot of time, effortand tax benefit to keep it.
And he actually has a disabilityrating too, which means it's
highly likely I can do a secondVA loan for him to purchase a
(29:04):
new home that he can do aslittle as zero down on, even
though he already has a VA loan.
I've actually done loans forpeople where they've had three
VA loans and so it's not aguarantee.
It's all based on what theircurrent balance is on their
existing loan.
But this gentleman bought hishome many years ago when the
limits were much lower, so Iknow his mortgage balance isn't
going to be that great.
(29:24):
So that's the nice thing withthe VA loans that a lot.
It amazes me of how often I'mmeeting with someone and I ask
them if they're a veteran andthey've owned two or three homes
they've never used a VA loanbecause no one ever brought it
up and the banks and the creditunions they're typically not
going to bring that up.
Speaker 2 (29:42):
Now you just said two VA loans, so I thought you
needed to have the certificatethat is only good for one VA
loan at a time.
Speaker 3 (29:55):
No, it's based on a limit, a loan limit, and so if
someone has a VA loan andthey're buying another home,
they typically will have themwrite a letter of explanation
that they're buying a largerhome because now they have kids
or they're buying down becausetheir kids are out of the house.
I mean some letter ofexplanation as to why they're
(30:15):
buying a second home, andtypically the most common thing
that people will write is butthey plan on selling their home
after buying.
So I've done many, many, manyVA loans for people that already
had a VA loan.
I actually did one last yearwhere the person had two VA
loans.
He had a VA loan in Indiana,one in Alaska and he was buying
(30:36):
in Washington because it moved,but the limits were good enough
to where he could still do that.
Once again, it comes down toindividual.
Everyone's got an individualsituation, but those are things
that a lot of lenders don'tthink about asking and looking
into judy.
Speaker 2 (30:52):
Is there anything else that should ask steve not
that I can think of, I just Ijust keep coming back to.
People need to sit down andhave these conversations so they
understand what their story is,what their picture looks like.
And, as you said, that does notcost anything, correct?
(31:12):
It doesn't cost anything withyou and it doesn't cost anything
with us as realtors.
And then, once you make yourdecisions, for us, commissions
are negotiable, and so it's justthe best way to go sit down
with the lender first, then talkto your realtors or, in the
(31:33):
case of selling, talk to therealtors first so that you have
an idea of the value of yourhome information is power.
Speaker 3 (31:40):
The more information a home seller or home buyer has,
better equipped to make theright decision for themselves.
So we don't make decisions forthem.
You don't make someone selltheir house or buy a house.
It's their decision.
We're providing knowledge andexperience.
Speaker 1 (31:58):
If someone was interested in talking to you
about their mortgage or buyingor selling, how would they get
ahold of you?
Steve, buying or selling, how?
Speaker 3 (32:06):
will they get ahold of you, steve?
Well, my cell number is alwaysthe best and that's 206-819-7140
.
And I actually have a.
You know, I used to tell peoplecall 24 hours a day, basically
Saturdays, sundays.
Speaker 1 (32:23):
The problem is, they did I mean.
Speaker 2 (32:23):
I would get calls at 1130 at night.
Speaker 3 (32:25):
So now my rule is you can text 24 hours a day and I
respond If I see it.
Someone texts me at two in themorning and I see it at six or
seven in the morning when I wakeup I respond.
So texting is fantastic Duringthe workday.
Obviously, calling is great.
People can email me.
It's S-O-D-O-N-N-E-L-L atcmghomeloanscom.
(32:48):
Yeah, I look forward to talkingto while working with you and
Judy in the future and hopefullydoing getting some clients into
homes Well thanks so much,steve.
Speaker 1 (32:59):
We really appreciate your expertise on this.
I think it'd be really helpfulfolks.
So if you're interested inmortgage information, contact
Steve.
If you want to know the valueof your home, contact Judy or I.
We do it free and I tell youwe'll be more accurate than, say
(33:19):
, zillow or Redfin will be Okayfor sure.
Okay, all right, that's it.
Thanks for watching and orlistening to Getting your Edge
Out to Right Size your Home andLife podcast.
Thanks, steve O'Donnell fromCMG Mortgages.
Bye-bye, bye-bye.
Okay, welcome everyone.
This is Getting your Edge Outto Right Size your Home and Life
podcast.
I'm your co-host, dennis Day ofthe fabulous Edge Group team
powered by EXP.
I'm with my co-host, judyGratton.
Happy 4th of July, and so on.
Judy, did you have a good day?
Speaker 2 (00:17):
I did.
I had a wonderful 4th of July.
I went to the Bothell MainStreet Parade.
We put our chairs out atmidnight on June 30th.
We do that every year so we canhave a seat.
Speaker 1 (00:28):
And our guest today is Steve O'Donnell, a mortgage
broker with CMG, and he's hereto talk about interest rates,
mortgages and all that goodstuff.
So, steve, let's start off.
Tell us who you are and whatyou do and who you work for.
Speaker 3 (00:48):
Well, I'm with a company called CMG Financial or
CMG Home Loans and we're basedright here in Mill Creek If
anyone knows Mill Creek TownCenter, we're right down there
and I've been.
Let's see, I originated myfirst mortgage, I think, in 1995
.
So pretty much what's thatsaying?
I've seen it all.
So I've seen the ups and thedowns and the good and the bad,
(01:11):
and there's always, every time Ithink I have it all learned or
know everything they change therules anyway.
So the one thing I pledge isyou know, with the changes all
the time and everything is, eventhough I've been lending many
years is I will always do mybest to get the right answer for
every client.
Speaker 1 (01:26):
What's going on in the mortgage industry right now?
What are interest rates?
Speaker 3 (01:31):
Well, you know they've been pretty volatile.
But a lot of times people thinkrate is the most important
thing to discuss and to me themost important thing is the
payment.
So I always try to make surethat the payment fits the client
, not the interest rate, becauserates will change, but the
payment is what you want to theclient to carry.
Right now, the standard 30 yearfixer in the mid to upper 60s,
(01:52):
you know which.
Historically that's a good rate.
In the recent, like last 10years People are like, oh,
that's really high, but it'sreally not a bad rate
historically If you look atthrough the last 30 years.
I guess that's pretty much it.
With the interest rates,they're pretty volatile this
week and I know that you knowwhen we talk volatility
sometimes that's the differenceof getting a credit to buy down
(02:13):
the rate a little bit or payinga little bit to buy it to the
point where the client's mostcomfortable.
Speaker 2 (02:19):
Kent, what do you mean?
It's volatile.
Can you kind of give us alayman's term of why it's
volatile?
What's happening?
Speaker 3 (02:28):
Well, a lot of things that happen in the world can
affect mortgage prices.
It's primarily driven by themortgage-backed securities
market, which is tied to thebond markets, and I'm not an
expert in those.
I mean I watch the experts, Ihear their predictions.
In those, I mean I watch theexperts, I hear their
predictions and, you know,sometimes politics plays a role
in that.
I mean, it's things that Ialways say the rate is something
(02:50):
we don't control, but you know,we can kind of try to time it a
little bit, but in reality, ifsomeone is buying and the rate
is at a higher point, wellthere's a higher likelihood that
they're going to be able toimprove their rate in the future
with a refinance.
True, true.
Speaker 2 (03:08):
So when someone is considering buying a home and
the interest rates, if they'revolatile, they shift frequently,
right it's, you know, you don'tknow, from day to day it could
go up a quarter of a point,which can make a significant
difference in their purchasingpower.
So how do we, you and I andDennis, how do we keep our
(03:33):
clients informed about thatinterest rate if it means a
difference between them beingable to buy what they want and
not?
Speaker 3 (03:41):
When someone is looking for a home, I usually
like to qualify them at acomfortable point to where we
have a little cushion.
So if the rate does go up alittle bit then they have the
option of either buying it downor we already factored that in
with their pre-approval.
Once they're under contract,then it's smart to lock in at
(04:01):
the time that the rate iscomfortable for them.
Then it's smart to lock in atthe time that the rate is
comfortable for them.
You know there's differentclients will have different
levels of expertise in watchingthe financial markets and I
don't tell someone when to lock.
I can give a recommendation butit's their choice.
Speaker 2 (04:17):
Is there anything like lock and shop anymore or no
?
Speaker 3 (04:20):
There is.
I haven't really had anyone usethat recently.
There's some options forsellers as well, where they can
lock in a rate to sell a homeand I'm learning on that.
So that's something that youand I can talk offline about if
you have an interest, and that'stypically used for a home that
maybe has sat on the market fora little bit, where a seller can
(04:41):
purchase a rate for an extendedperiod that their buyers can
use.
So that's something new to me,but it is something I learned a
little bit about last week.
So that's on the seller side ifit's a home that's not moving.
So if the homes are selling intwo or three days, there's no
reason for, or even two or threeweeks.
There's no reason for a sellerto consider that that's more for
(05:03):
a home that's maybe sat forthree weeks or four weeks and
not getting a lot of interest,than the seller can advertise a
lower interest rate.
Speaker 1 (05:10):
I had not heard of that.
That's really interesting.
Speaker 2 (05:13):
I think that's cool.
Speaker 3 (05:14):
Yeah, depending on the market or the home, the
individual home being sold.
Speaker 2 (05:20):
I mean they just think they go to a lender and
they go to their bank and theyget a loan.
They don't understand there areso many working parts that can
affect what that loan is, whatthe interest rate is, how it's
structured, how long it is.
I mean it's just there's somany working parts.
It's really important.
I always encourage buyers andparticularly to touch base with
(05:44):
their lender before they startlooking for a home.
Speaker 3 (05:47):
Well and that's the thing with a lot of your
standard credit unions and banksthey're going to have the
standard products and that willfit many people, but at the same
time, a lot of times a mortgagelender such as myself may have
products or better rates thanwhat the banks and credit unions
have, depending on the property, the purchase price, the
(06:11):
client's individual creditscores and that sort of thing.
So experience does play a role,the same as for you and Dennis
with selling or buying.
The level of experience for areal estate agent makes a big
difference for a buyer or aseller.
Speaker 1 (06:24):
We kind of built our business around downsizers and
we hear this well, I've got this3% interest rate.
I want to move but I can't giveup that rate because the
interest rates are so high.
Do you have an answer for?
Speaker 3 (06:38):
folks like that.
That's actually one of thethings that's created.
A little bit of the issue inthe real estate market is
because there's not a lot ofpeople listing their homes
because they're tied to a rate.
Now each individual's situationis going to be different
depending on like you'rebringing up people that are
looking at downsizing.
A lot that will come into playwith that is well, how much
(06:59):
equity do they have?
A lot of people downsizingmight be able to sell and pay
cash for something, which me, asa lender, I think that's
fantastic.
The catch on that, though, isthey need to sell before they
buy, so how can they do that?
If there's no finance, you knowthey're not getting a mortgage.
And one thing that I'verecommended to people in my
(07:20):
years as a bank manager I was ata larger bank, I won't name it,
but but basically, I had manyclients.
If they owned their home freeand clear or had a lot of equity
, set up a home equity line ofcredit with a significant
balance available.
That way, they could possiblypay cash for a home or do a
significant down payment as abridge loan without having their
(07:43):
house sold first.
Now you can't really do that ifyou're planning on selling in
the next short-term period Imean in each equity loan product
or equity line of creditproducts going to have different
rules on it.
So that's something for someoneto do now if they're thinking
about moving in three to fiveyears.
So, outside of that, if someoneis looking at downsizing right
(08:06):
now, I have some incredibleproducts that I'm not going to
get into all the nuts and boltsof them.
But I have one product wherepeople can borrow from the
equity of their current home.
It will make their mortgagepayment for six months out of
part of that equity and thenthat can be used as a down
payment.
So you're not having twomortgage payments and it gives
(08:27):
you six months to sell your home.
So that's I mean, that's justan example of a bridge loan
option that isn't that scary andactually how that product
actually works is if the househasn't sold within the six
months, then there's an agreedupon price up front that that
equity company actuallypurchases the home.
So it's completely risk-free.
(08:48):
But it's not going to be asprobably as profitable as you
and Judy selling the home forthem within that six months.
Speaker 1 (08:55):
That sounds like a great option.
The adjustable rate mortgagesused to be cheaper.
I mean they were a good buy.
Are they still a good buy?
Speaker 3 (09:05):
I have not seen any adjustable rates that have
really stood out in a long time,ever since the rates went down
in the twos and threes.
Ever since then I've never seenit.
I have not done an adjustablerate mortgage in years.
I used to do a lot of them whenthe mortgage rates were in the
eights, sevens, eights, and thenthey'd have an adjustable rate
(09:25):
at five or whatever.
But will they come back?
I don't know, because that's aninvestor-driven product.
I'm assuming that the investorsthat buy mortgage-backed
securities are looking at itgoing.
Their margin isn't enough forwhat they want to profit,
because the average 30-yearfixed is not held for that long
anyways, based on the amount oftime that people stay in homes,
(09:47):
not expecting to see anyincredible adjustable rates in
the near future, sometimes withjumbo rates though.
So if someone's buying in thejumbo market in the one and a
half, 2 million $3 million range, those are driven based on
private investors and so thosecould have some adjustable rate
options.
That's something that, onceagain, is on an individual basis
(10:08):
, based on the client that'sbuying.
And you were talking aboutdownsizing.
Typically, people don'tdownsize, or jumbo loan home, I
guess, would be the term.
Speaker 2 (10:18):
Well, now I know the jumbo loans have adjusted over
the years as to where you landto become a jumbo loan.
Speaker 3 (10:27):
It varies by county.
So the national conforming loanlimit is $766,550.
But within King Pierce andSnohomish County that is a
higher limit.
Speaker 2 (10:39):
And that means anything above that is then
referred to as a jumbo loan.
Speaker 3 (10:44):
Correct and depending on where conventional loans are
at and jumbo loans.
Sometimes jumbo loans are moreattractive than conventional
loans, sometimes they're not.
If they're not, then what alender can also do is structure
it where you keep the firstmortgage in a conventional and
then you do a second equity loanand you bundle it into two
(11:08):
loans for the client.
That way they minimize theirinterest expense.
Speaker 2 (11:13):
The reason I'm asking is that so many of the outlying
areas in Western Washingtonanymore are getting higher and
higher, where a million dollarsis kind of your average price
Loan limits in King Pierce andSnohomish County are $977,500.
Speaker 3 (11:30):
And then that can vary to the other counties, like
Spokane and stuff like that aregoing to be at $766,550.
Now it does also vary based onthe number of units.
So if someone's buying a duplex, a triplex or a fourplex, then
that can be higher balances andstill be a conventional as well.
Like a duplex would be1,251,400.
It would stick within theconventional and so forth.
(11:54):
So the triplex and fourplexwill be higher.
Speaker 2 (11:57):
So that's.
I mean it's good for people tounderstand that, that they jump
into a different type of loanproduct at that level.
And sometimes it can be better,you say, and sometimes it isn't
as good, and so then you haveto become even more creative.
Speaker 3 (12:15):
Right, and if someone goes to the bank or the credit
union, they're going to have oneoption for a jumbo, whereas a
mortgage lender such as myselfhave probably 20 different
investors.
So that's the nice thing as faras the difference between the
banks and the mortgage companiesis.
A lot of times the mortgagecompanies have a lot of options
that don't necessarily fit thestandard customer, like I did a
(12:38):
bank statement loan for agentleman where we used his cash
flow to qualify him instead ofhis tax returns.
So there's lots of differentoptions and that's why I always
recommend, before you and Dennistake someone touring houses,
make sure that they know whatthey are looking for, because
anyone can go out and look at ashiny new house or big,
(13:00):
beautiful house and fall in lovewith it and then find out that
that's well above their budget,or well below their budget
sometimes.
Speaker 2 (13:06):
We recommend that immediately, that you know
that's one of the firstquestions have you spoken with a
lender?
And then our goal is to try andhave them fully underwritten as
quickly as possible so thattheir lender approval letter is
strong, not just a pre approval.
Speaker 3 (13:27):
Correct.
There's three different levelsof a pre-qualify or pre-approval
.
There's a pre-qualify that justbasically means that the lender
feels like they should qualifyat purchasing that particular
price point.
And then there's what we callan AUS, or automated
underwriting approval, whichmeans that the decisioning
(13:48):
engine the way I look at that,it's as good as the information
that was input.
So if someone overstated theincome or assets, then it may
not be a valid approval, but ifit's accurate, with pay stubs or
tax returns and bank statementsand also we do have a credit
report on that so an AUSpre-approval is typically
(14:11):
accepted and considered strongenough for most offers.
And then if you have someonethat has, that's self-employed
or has variable income, I highlyrecommend doing a fully
underwritten pre-approval whichis no cost or obligation to the
client.
And that's what I tell all myclients that coming and talking
(14:31):
to me costs you nothing.
And if we do a pre-approvalthere's no cost.
If you use my pre-approvalletter, there's no obligation I
mean.
So basically I'm a very lowpressure person that just wants
people to learn and make surethat they make the right
decision for the home that theybuy.
Speaker 2 (14:50):
So if someone comes to you and they tell you that
their goal is to downsize fromthe home that they're in into
something maybe smaller, theyhave good equity in their home,
so they have the cash for eithera good down payment, possibly
even pay it off, but a loan theywant to know is a loan a good
(15:10):
idea.
Should I buy the rate down withsome of that money versus
putting it all down as a downpayment?
What would you say to someonein a situation like that?
Speaker 3 (15:21):
The first thing I usually ask is have you already
consulted a real estate agent tosee what you think your home is
worth?
Because many times people willgreatly overstate or understate
the value of their home andhaving an experienced agent such
as you and Dennis would make memore comfortable calculating
out what their equity availablein that home is.
(15:43):
So once we know what the equityis, then I look at what their
monthly cash flow is fromretirement social security.
Maybe they're still working,but if they're still working,
maybe they're retiring in one tothree years.
So I take that into account.
What their cash flow will bewhen they retire.
That's for me personally, tomake sure that someone will
(16:04):
always be comfortable in theirhome.
Then, also, depending on whattheir liquid assets are, as far
as investments and bank accountsand that sort of thing, I mean
sometimes people don't have any,sometimes people have a lot.
All that goes into my thoughtprocess about what I recommend
for that client when they'redownsizing.
I mean typically the reasonsfor downsizing are economic or
(16:28):
health.
I mean as far as like.
Well, I guess a good example ismy wife keeps bringing up about
how eventually she wants tohave a ranch house instead of a
two-story house, because goingup and down stairs that can
determine what type of houseyou're buying.
And then the next mostimportant thing is the area, and
so once we kind of get thatfigured out, then we know a
price point and then I work itinto to make sure that they're
(16:50):
comfortable with the payment.
As far as what I brought upbefore about the bridge loan
option, I mean there's manydifferent ways to downsize.
You can sell, then buy, you cando a bridge loan, you can have
a home equity line of credit setup ahead of time.
Sometimes people have enoughcash that they can qualify with
buying a new mortgage and theystill sell their house after the
(17:13):
fact.
I've had many clients do that.
Everyone's got a differentsituation.
That's why I was saying thebest recommendation I have is to
sit down with a lender thatyou're comfortable with, that
you feel like has the experienceto come up with a plan Are
there special ways that somebodycan buy down this high what we
consider now a high interestrate.
(17:34):
Well, there's always the optionof buying down the interest rate
, which you know.
The common term is, that is,paying points.
It has not been common forpeople to pay a bunch of points
because a lot of times thosefunds can be used for having a
smaller mortgage or helpingcover the closing costs and down
payment.
It's on an individual basis.
If someone's going to get intoa mortgage and carry that
(17:56):
mortgage for long-term, thenpaying points is worth it
because there's a break-evenpoint based on the amount that
you pay compared to the savingsand the payment.
I guess the answer to this Danasays there isn't one answer.
It depends on that person'ssituation and if someone plans
on doing a big lump sum, paydown on it after selling their
(18:17):
current residence, for instance.
You don't want to pay a bunchof points on a larger mortgage
to have a smaller mortgage afterthe fact.
Yes, you can buy the interestrate down.
You can also refinance.
In the future.
We have what's called the raterebound, which basically CMG
waives all lender fees and gives$1,000 credit towards
third-party fees such as titleand escrow and appraisal.
(18:39):
That's a common thing thatpeople are looking at now is
that they're going to buy nowwith the expectation that
sometime in the next six months,two years, whatever they will
refinance and drop theirinterest rates, so we can do
that at close to no cost.
Speaker 2 (18:54):
Is there a time limit , like how long they have to
hold on to the original loan orhow I believe it's a six month.
Speaker 3 (19:02):
Let me I actually have that up there.
I believe it's six months ofthat.
They have made six paymentsbefore they refinance and then
that offer is good for fiveyears.
Speaker 2 (19:14):
Oh, good Okay.
Speaker 1 (19:15):
Five years.
Okay, that's pretty strongoffer.
Do you expect that we'll seeany significant rate drop in
this calendar year?
Speaker 3 (19:29):
You know, the funny thing with that question, dennis
, is I watch a lot of experts ontheir daily podcasts, that sort
of thing, and I have a sayingthat the experts, if they're
right, 50% of the time they'redoing pretty good.
Now, in my opinion, I dobelieve that there will be a
rate drop as it gets closer tothe election, but that's not
(19:51):
necessarily any guarantee oranything like that.
It's just I think that thereare political moves that happen
to push rates down, so I don'tknow if that will be the case or
not.
But you know, there's also alot of factors, such as
inflation, things that happen inother to drop and drop and drop
(20:11):
, and they really haven't.
Honestly, the fact that therates dropped so low during 2020
(20:36):
and 2021 was wonderful for thepeople that refinanced and
people selling at that point,because it pushed prices up up.
But it's created a little bitof a conundrum now, because now
you have people that bought at ahigher price with lower
interest rate, trying to sell topeople that will have a higher
interest rate.
Speaker 2 (20:56):
There's always something to the yang.
It always, you know it'swhatever it is.
If it's good now, there'sprobably going to be a downside.
But I, you know, I frequentlytell people that those rates
were a result of a nationalcatastrophe.
The COVID pandemic To get arate like that is generally the
(21:18):
result of a national catastropheand I really personally would
not like to see us in any morenational catastrophes.
Speaker 3 (21:26):
Exactly exactly.
So.
If the rates, if inflation, isin check and people are buying
and selling homes on a regularbasis, I mean, that's part of
the issue right now has been thelower inventory has kept prices
up, which is great for sellersbut not so great for buyers,
right, I like to see an evenmarket where the buyers and
(21:48):
sellers are pretty even outthere.
Then that to me is a little bitmore fair.
And then the interest rates aretypically pretty stable at that
point.
And when I say stable, thatstable might be six, it might be
five, it might be eight, I mean, but it fits the economic
situation of the country at thatpoint, based on wages and that
(22:10):
sort of thing.
Speaker 1 (22:11):
Are you seeing a slowdown in new construction
because of the high interestrates?
Speaker 3 (22:18):
Not at all.
I mean, from just being aconsumer myself and a citizen
driving around, I see lots ofnew construction builds going
out and many of the people in myoffice here have builder
relationships and they're doinga lot of mortgages, so I don't
think that the builders arehaving any issues with selling
(22:39):
their properties right noweither.
Speaker 1 (22:41):
Okay, we have a severe shortage of homes, and
the only way to alleviate thatis to build more homes.
Speaker 3 (22:48):
So Well, and I'm seeing plenty of multifamily
like apartment buildings andstuff like that being built too.
So there I mean, there's newhomes for purchase, but then
there's also many new homesgoing up for renters which those
renters would hope to behomebuyers.
But not everyone is alwayspositioned to be a homebuyer and
that's, once again, is probablygetting above my level of
(23:10):
economic experience.
But I worked with a builderlast year, built 48 townhomes
and it started off gangbusterswhere they're getting four and
five offers in every home.
Then the last few buildings.
All of a sudden there was a bigslowdown and the rates had
actually gone down a little bit.
So it wasn't necessarily ratedriven, it was just the time of
year, I think.
They all sold and they all soldfor significantly higher
(23:33):
towards the end than what theysold for at the beginning.
So we did see a consistentincrease in prices throughout
the sale of the 48 units.
Speaker 1 (23:42):
So if we're looking to buy.
How do we improve that creditscore?
Speaker 3 (23:46):
Well, the first thing I recommend is knowing what
your credit score is and ifthere really is an issue.
I've had many people think thattheir credit is fine when it
wasn't, or, on the reverse,where they thought that they had
something, that their creditwas terrible and it was fine.
So I can do a soft pull creditcheck which basically doesn't
hit your credit as the same asapplying for a car loan, credit
(24:08):
card or even a mortgage, and itgives me one score with
TransUnion.
It gives me the entire reportas far as collections balances,
all the information I need to beable to advise, and we can do
what-if scenarios, which, let'ssay, if someone's at a 590
credit score and they need to beat a 620, I can do a what if
(24:29):
scenario that says, ok, if I dothis and this, your score will
move to here, and that's allautomated through the credit
reporting agencies that wecontract with, and so I've done
that a lot of times for peopleto help with their to get them
qualified.
Sometimes it can be doneinstantly.
You'll pay down this balancefrom 500 down to $10.
(24:52):
And all of a sudden, theirscore jumps up 20 points.
There's a lot of little tricksthat we have in the industry
that can help people purchasesooner and hopefully that helps
a little bit there.
I mean, because there'sdifferent things.
There's the debt to incomeratio.
So sometimes I'm advisingpeople instead of putting down
(25:13):
50% on your down payment, whydon't you do 20% and get rid of
all these car loans and boatloans and stuff like that?
So once again, it comes down toanalyzing each individual home
buyer's financial situation andgiving my advice.
Speaker 2 (25:31):
So you're kind of a counselor too.
Speaker 3 (25:34):
Well, that's what I've always enjoyed.
I mean, I was a bank managerfor many years and I always like
to look at the total financialpicture for someone, not just
hey, can I slam them in a loan.
Now, if the client isn'tinterested in my advice, that's
fine too.
I mean, many clients that Ihave have a higher level of
education and expertise than Iwould in the financial world.
(25:54):
I mean, I've worked withfinancial advisors and actually
financial advisors are actuallysome of my best referral sources
because they appreciate myadvice.
I won't say which company, buta financial advisor company
that's local.
I have three different gentlementhat have referred me clients
not because they're buying ahouse but because they're going
(26:14):
to withdraw a huge amount oftheir retirement to pay off
their mortgage when they retired.
And they wanted me to kind ofexplain to them that there was
some benefits to carrying themortgage, depending on the
balance, if there could be a taxbenefit.
But it was going to be a hugetax implication for the majority
of these people closing outretirement and or investments
(26:38):
that would have significantcapital gains, pushing them into
a higher tax bracket.
So, hearing it from me when Iwasn't trying to talk them into
doing a mortgage.
I had nothing to do with doinga new mortgage.
I think helped in each of thosecases them retain the client's
funds, which saved that clientthose clients tens of thousands
of dollars that they would havehad to pay to the IRS.
(27:00):
I have a saying you don't haveto have your house paid off to
retire, you just have to haveenough eggs in your basket.
Speaker 2 (27:07):
And sometimes it's better not to have the house
paid off.
I know I have a client and theywere like, yeah, we're going to
pay cash for a house.
And I'm like, before you dothat, you need to talk to a
lender, you need to weigh theoptions so you make an informed
decision for what's best for you.
Speaker 3 (27:26):
Right, and I usually recommend talking to a lender, a
financial advisor and a CPA.
Speaker 2 (27:32):
The importance of sitting down with Steve or
someone like Steve andunderstanding what it is you're
doing, because it is acomplicated business.
It's not one size fits all andI think a lot of people think
it's one size fits all and itisn't.
Speaker 3 (27:50):
You know, having a level of trust.
I mean, obviously your clientswholly trust both of you and I
want my clients to trust me.
The majority of my businesscomes from past clients.
I just had a email come in justa few minutes ago from a client
that he bought his first homewith me 10 years ago and and he
was looking at getting my adviceon turning that house into a
(28:14):
rental and buying another home.
Well, the first thing I'm goingto do is probably recommend him
having a conversation with thetwo of you on, first and
foremost, you turn a owneroccupied home into a rental and
then you keep it as a rental toolong you just turn that into.
You lost the tax benefit ofselling a home tax-free with the
(28:37):
exemption.
So the fact of him doing that,yes, he could get some added
equity by holding onto the home,but at the same time it might
cost him a lot of time, effortand tax benefit to keep it.
And he actually has a disabilityrating too, which means it's
highly likely I can do a secondVA loan for him to purchase a
(29:04):
new home that he can do aslittle as zero down on, even
though he already has a VA loan.
I've actually done loans forpeople where they've had three
VA loans and so it's not aguarantee.
It's all based on what theircurrent balance is on their
existing loan.
But this gentleman bought hishome many years ago when the
limits were much lower, so Iknow his mortgage balance isn't
going to be that great.
(29:24):
So that's the nice thing withthe VA loans that a lot.
It amazes me of how often I'mmeeting with someone and I ask
them if they're a veteran andthey've owned two or three homes
they've never used a VA loanbecause no one ever brought it
up and the banks and the creditunions they're typically not
going to bring that up.
Speaker 2 (29:42):
Now you just said two VA loans, so I thought you
needed to have the certificatethat is only good for one VA
loan at a time.
Speaker 3 (29:55):
No, it's based on a limit, a loan limit, and so if
someone has a VA loan andthey're buying another home,
they typically will have themwrite a letter of explanation
that they're buying a largerhome because now they have kids
or they're buying down becausetheir kids are out of the house.
I mean some letter ofexplanation as to why they're
(30:15):
buying a second home, andtypically the most common thing
that people will write is butthey plan on selling their home
after buying.
So I've done many, many, manyVA loans for people that already
had a VA loan.
I actually did one last yearwhere the person had two VA
loans.
He had a VA loan in Indiana,one in Alaska and he was buying
(30:36):
in Washington because it moved,but the limits were good enough
to where he could still do that.
Once again, it comes down toindividual.
Everyone's got an individualsituation, but those are things
that a lot of lenders don'tthink about asking and looking
into judy.
Speaker 2 (30:52):
Is there anything else that should ask steve not
that I can think of, I just Ijust keep coming back to.
People need to sit down andhave these conversations so they
understand what their story is,what their picture looks like.
And, as you said, that does notcost anything, correct?
(31:12):
It doesn't cost anything withyou and it doesn't cost anything
with us as realtors.
And then, once you make yourdecisions, for us, commissions
are negotiable, and so it's justthe best way to go sit down
with the lender first, then talkto your realtors or, in the
(31:33):
case of selling, talk to therealtors first so that you have
an idea of the value of yourhome information is power.
Speaker 3 (31:40):
The more information a home seller or home buyer has,
better equipped to make theright decision for themselves.
So we don't make decisions forthem.
You don't make someone selltheir house or buy a house.
It's their decision.
We're providing knowledge andexperience.
Speaker 1 (31:58):
If someone was interested in talking to you
about their mortgage or buyingor selling, how would they get
ahold of you?
Steve, buying or selling, how?
Speaker 3 (32:06):
will they get ahold of you, steve?
Well, my cell number is alwaysthe best and that's 206-819-7140
.
And I actually have a.
You know, I used to tell peoplecall 24 hours a day, basically
Saturdays, sundays.
Speaker 1 (32:23):
The problem is, they did I mean.
Speaker 2 (32:23):
I would get calls at 1130 at night.
Speaker 3 (32:25):
So now my rule is you can text 24 hours a day and I
respond If I see it.
Someone texts me at two in themorning and I see it at six or
seven in the morning when I wakeup I respond.
So texting is fantastic Duringthe workday.
Obviously, calling is great.
People can email me.
It's S-O-D-O-N-N-E-L-L atcmghomeloanscom.
(32:48):
Yeah, I look forward to talkingto while working with you and
Judy in the future and hopefullydoing getting some clients into
homes Well thanks so much,steve.
Speaker 1 (32:59):
We really appreciate your expertise on this.
I think it'd be really helpfulfolks.
So if you're interested inmortgage information, contact
Steve.
If you want to know the valueof your home, contact Judy or I.
We do it free and I tell youwe'll be more accurate than, say
(33:19):
, zillow or Redfin will be Okayfor sure.
Okay, all right, that's it.
Thanks for watching and orlistening to Getting your Edge
Out to Right Size your Home andLife podcast.
Thanks, steve O'Donnell fromCMG Mortgages.
Bye-bye, bye-bye.
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