First-Time Homebuyer Tips: Why NOW Is the Best Time

Transcription

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Pete

What's up, guys, thanks again for checking out this podcast. Today's guest, I have a really, really special friend, and he's another loan officer within the industry. We started working together, working with the same company, and we just did an amazing conversation about refinancing, streamlines, streamline refinancing.

Is it a great time to buy? We had a really, really good conversation about whether you should work with a broker or a mortgage banker and what the differences are as it relates to the customer and picking a really good lender. So please join me in this conversation with Justice Roberts from Renown Mortgage.

Thank you so much. What's happening, Justice?

Justice

What's going on, Pete? I'm looking forward to having a conversation with you today, man.

Pete

Yeah, it's kind of cool because I'm going to tell the story of how we met. Justice lives. You live in Washington.

We're in Washington.

Justice

So a little south of Seattle in a city called Puyallup. It's like an old native tribe. And so, yeah, that's that's where I've lived and grown up my entire life.

Pete

So me and you met down in Costa Rica randomly. We were both at a mortgage retreat. And so, Justice, you've been in the mortgage industry.

You're a loan officer, just like I am. How long have you been in the business now?

Justice

In the business for 12 years, a little over 12 years. And got in as a...

Pete

What was that, like 2012? 2012. So, yeah, so we met down in Costa Rica.

We both are part of a coaching group called L360. Shout out to Mr. Tim Brahim, who is our amazing coach that has coached both me and you. And so we met down there in Costa Rica and then come to find out you have family that lives in Reading.

And so you came down to visit the family for like a month. It's super cool. We've been hanging out now for almost 30 days.

Justice

Yeah, it's it's so cool. I think when I when I first met you, I was like, no way you're from Reading. That's crazy because I've got family down there.

And super cool how being down here for the last month has been and getting to hang out. And I don't know, it's been a blast.

Pete

Yeah. And so what I also found out is that you had recently switched to going from, they call it banker or correspondent banker world as a loan originator to and you switched over to broker. And when I found that out, I was already in the process of applying to be a mortgage broker.

And so this is what the topic of today's conversation is going to be, is what are those differences from the client's perspective?

Justice

Oh, totally. Super unique how it was a path that I was already on. And obviously, just kind of as our relationship started to unfold, I'm like, there's so many similarities and connections.

And that brings us to our conversation today of the mortgage broker model versus like what both you and I experienced on the retail side of a mortgage banker.

Pete

Yeah. Yeah. And you were a banker for the first 11 years.

Justice

Yeah. I've been in mortgage banking ever since I got into the business in 2012. So this is kind of a new world that we're kind of both embarking on together.

Pete

Yeah. So I think what I'll do is I'll start by explaining what the difference is. So can you explain what a mortgage banker is versus a mortgage broker?

Justice

Yeah. So in the most simple terms, I can say like a mortgage bank, you know, they are set up and they have, you know, whether it's warehouse lines, they have their different programs. But a lot of times it's kind of set specifically to a certain for certain programs.

So you probably have traditional conventional loans, FHA loans, VA loans, USDA loans, things like that. But it is through one specific lender. It's one specific bank through their investors that they've kind of have set up.

And the difference with that versus a broker side of things is you have a wide variety of different banks that all offer those exact same programs. Our job is a little bit more like mortgage matchmaking a little bit, which is obviously looking at things from a price perspective and what the consumer or the buyer or whoever you're doing the loan for, what terms you're going to be able to get for them, but also just as equally important, what guidelines are maybe applicable. So what's the scenario of each client and their, what's the loan that fits them the best, which I feel like is really unique on the broker side is actually understanding enough about the client situation that you can actually find the right home for that specific borrower.

Pete

I found very similar conclusions looking at the two models. When I first got in the business, I was, I started working for a broker, but it was for a very short time. And I think maybe a year when I got in it was 2006 a year later that broker basically went banker.

He, he turned into a bank from broker to banker and then he ended up crashing in 2007 and then that's when I was a mortgage banker. But so many years had passed and the differences then as a banker, because it is like what you said, they have their products and it's conventional VA. It's basically, you know, your, your basic mortgage solutions, conventional FHA, USDA, VA, all those basic programs.

And the process is easier is what I had thought because you can use the same underwriter, you can use the same closer you can use, and you have the same people that you work with along for that transaction.

Justice

Totally. It's interesting you bring that up. I act, when I was making the switch for myself personally, I had a, one of my really good real estate partners that was just like, Hey, like what is, what does this mean for our clients?

What does this mean for what this experience is going to look like? Cause they had had some experience with brokers that were less than fantastic. And they're like, Hey, it seemed like I've worked in these scenarios.

And like the lender is always like blaming the broker on, Hey, sorry, XYZ isn't happening. Or they added this condition last minute. And the concern was there's going to be much less control as far as what that looks like.

And my, my answer was very, very simple to him, which I feel like is a direct correlation. It's just like, just like any industry, anything, you're going to have great originators. You're going to have, you know, originators that are going to struggle.

And I was like, it's all about the individual that you're working with. If you're working with a real estate agent, who's a strong real estate agent, they understand the market, they understand what needs to happen. You're going to have a transaction that follows suit with that.

Same as, as it relates to a lender. And I was like the guy that you've worked with and referred your clients over, that's the same guy that you're working with. And it doesn't mean there aren't bumps in the road, just like you and I are professionals.

And like, this is our craft. This is what it is that we're really good at. We understand guidelines, we understand overlays, we understand client situations, and it's our job to actually navigate through that.

So I was like, anytime you're getting a professional that's blaming an entity for what actually happened versus taking responsibility, that's the end of the conversation. We actually know what's different. And so on the broker side, it's like, you're still a strong originator, however it is that you set up.

And if you understand how mortgage lending works, I think you're not going to see those drawbacks on the broker side that maybe others have experienced.

Pete

Yeah. So, so what I heard you say was that this individual that you were talking to, he was concerned because you're going to be working with all these other banks and that you may not have a streamlined process and you might work with a bank that's dropping the ball on the file.

Justice

Absolutely. That was definitely the concern. And I think being able to actually answer that.

And I think it's not just lip service. I'm not just saying something that is, you know, sounds good so that it'll continue to refer clients over, but it's actually something that I stand by and it's my commitment to my clients as we move through this process is like, I'm not changing as a professional, like I'm still going to do right by you. I'm not going to put you in a loan program that you don't qualify for.

I'm not going to put you in a situation because I'm the professional.

Pete

I've told realtors this same thing. The loan officer is the professional. He should know more than the underwriter.

The underwriters all they're doing is following the rules, whether you're working with a mortgage broker or a mortgage banker, all of the money's coming from the same place, which is mostly Fannie Mae and Freddie Mac mostly. But as long as you understand the rules and what those rules mean, then you're going to be able to have your client have a really, really good experience, no matter if you're going banker or broker.

Justice

Absolutely. That's correct. I'd say there's one element, and this is always for clients doing their due diligence and knowing who they're working with is that I think the broker model based off of how it's set up, because there is significant price incentives that it has attracted, maybe a professional that is less, a little bit less qualified or maybe is not as seasoned in the business, which a mortgage banker, you know, I've seen that, you know, over time, or at least my history has told me in the last 10 years that there's people that have been, have built mortgage banking practices that really know their stuff. And so maybe that's brought a higher quality originator over time.

But I think the broker model and things based off of technology changing and things like that, where there are so many originators like you and me, who are kind of seeing the light, seeing an opportunity and how it can serve clients so much better without any of the drawbacks that have maybe been previously considered that they're going that route. And so I think that you'll see more of that. But I would also say with empathy to a real estate agent that it's experienced that is that like they probably have had a bad experience with a broker, but that doesn't mean that brokers don't know what they're doing.

Pete

It's all about the professional you're working with. I think that you said that very good. That was, that was said very well.

I agree with you. What are some of the other benefits that you would say for a customer, for a client or a realtor that has for working with a broker versus working with a mortgage banker?

Justice

Specifically for me, I just love the idea and I've loved the experience of flexibility. I mean, just being able to do right by the client and their specific scenario. And that sometimes means that you just have the right loan for that customer.

However it is that you structure it, however it is that you set up. I'll give you an example. So have had first time home buyers in the past where, you know, they are maybe just able to qualify, you know, credit scores in the mid to high five hundred range.

They're coming in at like a five 80 credit score. And in a retail model based off of how they're set up, a lot of mortgage banks have a certain appetite for a certain type of loan and their loan is priced accordingly. They have a certain appetite.

They're like, Hey, these are the deals that we like. These are the deals that we see that are performing. These are the deals that our investors want.

And so that correlates in price where that limits a consumer just because they're coming to a mortgage bank at that specific price, that may not be the lender's appetite for that specific type of loan. However, in this model, every client scenario, so same client scenario we're talking about, let's just say it's a five 80 credit score borrower that wants to first time home buyer that's trying to buy a house. There is a lender in a bank that wants that deal.

They want that loan and they are not only willing to approve it, but they're willing to give a good price for that, which I never had the flexibility on the mortgage banking side. It was like, Hey, I just got to sell what I have. I just have to offer what it is that I, that I have in this scenario.

It's like who wants this deal and is willing to give me a great price. And so that disparity or the difference between the two loan options are drastic and I'd say that it's two things. Number one, it's a better price for the consumer, but also number two, it might be the difference between being able to buy a home and not being able to buy a home on the side of mortgage banking.

If let's just say you're offering a certain interest rate that has a certain cost with that, with a loan of that characteristics versus a bank, that's going to offer it and give you a much better deal. That may be the difference of being able to close the deal. If closing costs and down payment and everything else in a retail model costs you $20,000 or $30,000 to get into the house where you have another one that only costs 12 to 15, that may be the barrier of entry difference.

It's like the difference between actually being able to close on a, on, on a house and buy your first home or not. And so that type of benefit I think is just, it's hard to look away from.

Pete

One of the things I wanted to clarify, when you say price, that means lower interest rate and or lower cost.

Justice

Yeah, I'd say it's both. A lot of times it's both. It's interest rate and the cost for the loan.

Pete

And so what I heard you say was, is that a retail lender, they're going to have a specific appetite for a specific type of loan that they like. And it doesn't mean they want to rip off that customer that has a 580. It's just, they don't necessarily want that customer in their portfolio.

And so therefore they're going to price it accordingly. Absolutely. And so, and I agree with you because I had worked with borrowers in the same situation and you know, sometimes it didn't work out and they were able to get, get a loan with, you know, with another, as a broker, we have the option as a mortgage broker to go to a bank that does have an appetite for that particular borrower.

Absolutely. Which is amazing. Yeah.

It's that's incredible. And then what are, what are some of the other characteristics would you say, or other benefits? I just made the switch just recently coming out of, from 2006, it was like 15, 16 years, something like that being in retail.

And so I'm, I'm really enjoying this model. It's very, it is a little different on the origination side.

Justice

Yeah. Yeah. I'd say I'm on multiple fronts and maybe I'm being funny as I, as I bring it up, but I think your originators are in better moods.

Like, you know, they've got more to laugh about and more to smile about because there is for, for someone that does well in this model, I think for me specifically, I found there's something that like matches my origination style instead of being, be required to say, no, I always wanted to have a yes mentality with my clients. If somebody comes to me and they want my financial help to help them get into a home or, you know, figure out their financing in some way, shape or form, I never wanted to have to turn them away. And so I think this model gives us the ability to not only find the right product, have the, you know, have a great price for that product, but it's like I have way more as it relates to multitudes of different types of products, whether it's renovation loans, construction loans, I get to work with real estate investors and I have solutions for them, both short term and longterm, any different type of like financing land loans. Like I've always been someone who has attracted of like, I just want to help everybody in some scenario.

If I've got clients that want my help as a professional, I'm not just limited to the certain product box that a mortgage banker and like nothing against mortgage bankers. I think finding your lane in, you know, I would say that there's originators that can do really well with like, Hey, this is the type of loan that I'm really good at. For me, I love residential real estate.

I love working with self-employed individuals. I love working with investors and I have way more options as it relates to that.

Pete

When we used to have a multitude of different banks to choose from the ability to offer a lot more for your self-employed borrowers, for investors, for having and having a lot more options.

Justice

And the retail model that I came from wasn't as plentiful as other investors or as what we have as a broker from, from just the business side of a retail, you know, mortgage lender and on the banker side, like it's expensive and it's a, and it's a layer of risk to be able to offer that many products and businesses could not sustain themselves to do that. And so I think with this model for just a consumer looking for a loan and like going to someone that has access to all of those different options I think is a huge benefit to them. And then as the originator, the more loans that I'm able to do, you know, I'm able to provide for my family and economically that is also a huge win.

Pete

Yeah. The other thing that I really is attractive to me by coming over to the broker channel is the transparency that we get with the price that you're talking about with the cost and the price and it's, the money's all coming from the same place essentially as a retail loan officer. I found that it was, it was challenging for me to sometimes understand what the total built in, built in margin was going to that bank.

Totally. And so it was really hard sometimes for me to figure that out, the transparency of the pricing. That is something as a borrower working with a mortgage broker or a mortgage banker, and there's mortgage bankers that have great transparency.

There's a lot of transparency, but I felt a lot more comfortable with what I was seeing as a broker with having all of the transparency there knowing exactly what's built into that margin so that I can offer a really good price and a really good deal for, for my customer.

Justice

Absolutely. To that point, I would just say something that I learned, and this is actually from old manager that I had in the mortgage space and he just, he was like, charge what you, what you're worth and earn what you charge. And it doesn't necessarily mean that like, I guess to that point of transparency, like do, do we as mortgage professionals make a good living and we have a great opportunity to do that.

But doing that in a transparent way where the consumer's understanding what that looks like and also you understand, so you actually know what you're, what you're actually selling to the customer and bringing to actually present to them and going like, here's the value in working with me. And yes, it has a cost as a, as associated with doing that. But being in the dark, not understanding fully what that looks like.

You're just kind of like misplaced and it's like, where am I at? I'm just kind of like telling you what it is that I'm offering cause that's all I have and don't really understand what that looks like. The transparency, at least it gives me a new level of confidence behind the value that I bring to the market and I think allows me to show up as a professional in a new way.

Pete

For customers that are deciding, you know, between mortgage, you know, if, if they, if they're shopping around, let's say, what should they be thinking about?

Justice

Here's what I'll say. Like, it's not always about price. So I think that being knowing who it is that you're working with, I'll come back to that same exact point is probably like the most important who it is that you're working with.

Do you appreciate how they communicate, how they're able to explain things to you? Do they actually know what they're talking about and are they able to answer the, you know, the, the questions as it relates to your loan and um, or yeah, situation like, are they able to answer that? But also being able, I think in this model, like very comfortable having conversations in regards to price and rate in terms and understanding that I always kind of felt like I was a little bit embarrassed to bring that up because I knew I wasn't the cheapest priced in the market.

And in when that was the case, like that obviously was like, Hey, how can I deliver value in so many other ways to actually quantify the offset for price? So I, so I would still say, I believe that value outweighs price at the same time, being open to have those conversations in regards to price of clients actually know what they're getting. But I think if it was like the first thing, like know who you're working with, are they a professional that's going to be representing you in this transaction?

This is the biggest transaction of your life.

Pete

Yeah. The other thing I would say too is, is if you're looking around, how vested are as this individual, this person is the loan officer, how vested are they within the community that they work in? It's huge.

It's huge because if something goes wrong, the person that's online that doesn't have any relationships in that town, they don't care whatsoever if they get a bad rep or if they don't return a phone call or if they drop the ball, there's, there's no accountability. Whereas me, if I have a client that's working here in town and something happens and I need to fix it, well, doggone it, I'm going to fix that problem because I have a reputation and I want to keep that reputation.

Justice

Absolutely.

Pete

That comes, that's a huge amount of value that you get from working with a local person, whether it's a mortgage banker or a mortgage broker.

Justice

A hundred percent. Yeah. I would see if you, if you have the ability to go local and I mean I do business all over the country, so it's the same.

So with that, but I would say if, if you're able to find someone that has, has that local presence, what a benefit because you have that layer of accountability, you know, that lender is engaged with all the realtors in the same area. The appraisers and like you, you mess something up and it's like, Hey, I, you know, I could drive to your office or, or you just have that level of accountability and like they're vested in that community. They want it to thrive.

And then obviously you have the other economic benefits of like supporting local business. You know, you're supporting that local lender.

Pete

They're also going out and they're investing their money locally at the local restaurant. It's, it's, it's keeping the money local. Absolutely.

Yeah. I definitely agree with that. What should customers be thinking about right now for their mortgage that let's go back a couple of years.

Anyone that bought a home in the last couple of years, should they be looking at refinancing? Should they refinance? So a lot of my customers, and I can tell you my opinion too, but like I'm curious on what your thoughts are on your past client database and what's happening right now because a lot of customers are getting tons and tons of mailers, tons of mailers.

I had a customer just a couple of days ago. He brought in this mailer. He was a veteran.

He's on fixed income. It had a loan amount of like $350,000 and he brought in his loan estimate to have me take a look at it. And I was proactively watching his and, and talking to him and he said, Oh yeah, I'm talking my servicer.

They were charging him 3% up front and only his monthly savings was only $150 a month. Holy cow. And so it was going to be a very, very long time until that loan recoup.

There's a lot of customers that are getting solicited right now. What are your thoughts on that?

Justice

I'd say that knowing that they're being solicited and for people that are listening or watching, I'm just saying like, Hey, you already know that it's hitting there. I would just say, look at, look at the loan and what, what the actual estimate is. What, what are they bringing to you as far as the actual loan offering and understand that.

And if you don't understand it, then reach out to Pete or reach out to me. I won't be disappointed. That would be something like actually understand what you're getting and don't be distracted just by the shiny interest rate.

You know, there's a reason why for marketing purposes and for all of that, the only reason they're able to actually offer and get you into a deal is because it's the shiny interest rate. But looking at the overall cost for the loan holistically is what you want. And I mean, honestly, if like you and I were comparing different loan estimates with, you know, from what a lot of these online lenders are putting together, it's like, I would never put my customer in that loan.

I think that's a terrible loan. It's a terrible structure, especially based off where the market's at. Cause I mean, my thought process is we are going to continue to see interest rates come down over the next couple of years.

And that doesn't mean you should be staying in your same six, seven, 8% interest rate that you've been at for the last couple of years, depending on where you're at. But we can't handicap your financial future by attacking all this extra money onto your loan. And in taking that away, it doesn't make sense.

Fast forward a year from now, two years from now, there's going to be another opportunity to refinance. And I don't want my clients being in a position to where we've added so much money to their loan that like, shoot, yeah, it makes sense to refinance again. But at the same time, you know, my loan balance has gone up by 10, 20, $30,000.

Pete

Yeah, they're looking at refinancing again. And before they paid two or three points to get that low shiny interest rate. Now they're looking at refinancing again.

They're looking at another shiny low interest rate that costs, you know, the same ish amount of money. The other thing I would say on top of that is that look to see work with your mortgage person to see exactly when that recoup time is. When are you going to make back the loan amount that you've increased?

Justice

Absolutely. Yeah, that's, that's a great way to underscore like the total loan costs. What's the, what's the recoupment, what's my cost benefit analysis and what does that make my recoupment period?

What does that make my break even period?

Pete

If I'm doing this deal with you today, you want to make sure that you understand how to make that calculation. Cause that calculation, you don't just simply take the cost and divide it by your monthly savings. Cause you also have amortization built in.

So you really need someone that knows what they're talking about that can show you exactly what that real recoup time is.

Justice

Absolutely. Yeah. Spot on.

It's not as simple as that. I think that could be an overly simplified calculation. And if your numbers make sense based off of that calculation, by all means you're probably sitting good, but it's probably actually better than that if the loan structure is correct.

Pete

Yeah. A lot of customers, they think, well, I was told way back in the day that I should not refinance unless I get 2% lower on my interest rate.

Justice

Heard that so many times. Well, here's what I'll say on my kids. I suppose it could matter if, if loan amounts were like 50, 60, $70,000.

And I would say the market for a lower loan amount has to move further than it does for a higher loan amount in simplicity for the numbers to pencil and to make sense. But there is no calculation, 1%, 2% that works for everybody that works for everybody. It's your scenario.

It's your loan amount. I'll tell you, if you have a million dollar loan, you interest rates do not have to move 2% in order for there to be a massive upsides in savings. And I think when you think about it, as far as the math goes, you're like, Oh, my savings of interest rates drop a quarter or a half of a percent on a million dollars.

That's hundreds of dollars a month. So I think everybody's situation is unique. Looking at the amortization, I've, I've even had conversations with people now where they're okay with the monthly payment that they're making right now, but we're looking at moving them to a different amortization.

Pete

So moving from a 30 year to a 15 year, they take that monthly savings and then they just keep making that same payment because they feel comfortable about making that current payment, interest rates drop and boom, they keep making that payment. Now we just cut their, their amortization down 10, 15 years.

Justice

Yeah, it's well, it's twofold. You're paying less for the house because interest is lower because you're dropping the rate on that. And then also you're paying that much extra towards the principal every month.

And so it's like a double whammy as far as an improvement in their scenario.

Pete

You want to explain what a, a lot of people are that bought in the last couple of years got a FHA loan, got an FHA loan. So any of our customers that got an FHA loan recently, they're getting tons of mailers on a streamline. You want to explain what a streamline?

Justice

Yeah. So an FHA streamline, really cool loan product. What's super, super unique about this is that pretty much FHA the way that they underwrite the loan is as long as you've made payments for the last 12 months on time, then you're eligible.

There are some important things. There have to be enough net tangible benefit, which means you're going to have to save enough money for us to be going through the fact to do this loan. But if you, you know, if all those numbers check out, it's an easy way without doing an appraisal without doing any income verification.

So it's like the easiest loan ever. And even if it situations has changed for your job or things like that, it just has, has no impact. You're able to drop the interest rate from where you're currently at to a new mortgage.

Very, very, very low cost in comparison to maybe no appraisal.

Pete

There's no appraisal required. There's no income required. There's no credit required.

Although you do have to show a payment history on that mortgage to show that you made your payments on time or since you've had the mortgage or for the last 12 months.

Justice

Absolutely. So you've, you've got that. And I mean, there's some slight nuances with it as well is that you are bringing some funds because your loan balance barely goes up because the only thing that's basically allowed to be financed back in is the mortgage insurance and payable to directly to HUD.

But you have, you know, some of those closing costs that you're going to have to cover. But if you look at the math and like they can hop on the phone with you or me and we could break down the scenario for them specifically. But a lot of times based off their cashflow over the course of a couple months, it's a complete wash and all they're doing is dropping their mortgage payment down.

And based off of payments that they're not having to make escrow refunds, all of that sort of stuff, it becomes a huge win for so many people to do a loan that is not only is it easy, probably the easiest loan you've ever had to do, but paired with that, it's also a super, super low cost loan and a great way to drop the mortgage payment.

Pete

I have a lot of people that are streamlining right now and a lot of people get these mailers on streamline and a lot of people don't understand or a lot of people don't realize that almost every loan has the ability to streamline aside from conventional. So you have VA allows you to streamline refinance, and they call it an EARL, interest rate reduction refinance loan. And then they have FHA streamline, they have USDA streamline refinances.

And so if you have one of these loans, you should definitely reach out to Justice or myself and we can definitely walk you through how this actually breaks down.

Justice

Absolutely. Yeah. Love to break that down.

Go over the math and just actually help you consider whether or not it makes sense.

Pete

Yeah. I'm also curious on what your thoughts are with interest rates. And I heard you say that you believe interest rates are going to continue to come down.

We've seen a little bit of a spike up a little bit here, but I have, I have clients right now that, you know, like, Hey Pete, you know, I kind of want to wait to see and wait for interest rates to come down a little bit more before I pull the trigger on this, you know, right now, monthly savings.

Justice

Yeah. I'd say the timing of it matters, but I think the education of thought process, I've been having a lot of similar conversations with a lot of my clients and I think it's holistically understanding their situation, but then also looking at the market and looking at the math. I talked with a client this morning and we were talking about what's the cost of waiting if we don't refinance, because you have to think about if we're not refinancing today, we're also missing out on the savings that we're able to capitalize on today.

Pete

Yeah.

Justice

And so, I mean, if interest rates trend down over the next several months or into the next couple of years, you know, if you're paying six, seven, 8% and you can get, you know, a much lower interest rate, what's actually the savings that you're missing out on and forecasting that into the future? Cause maybe you can save an extra hundred dollars a month, but that is 12 months down the road before you're going to save that extra hundred, $200 a month. So my question would be, how low do you think interest rates are going to go and how fast do you, how long do you think it'll take to get there?

Which I have clients that are like, well, I don't know. That's what you're supposed to tell me. But at the same time, it's like, I mean, that brings it up.

It's like, well, none of us really exactly know, which is why doing the math based on your scenario today and structuring a loan that makes sense so that we're not handicapping you in the future. We have such a short recoupment period. So we're doing a loan that makes sense in an environment where interest rates are going down.

Pete

Yeah. So what I heard you say there was it depends on the situation with that customer and they should really take a look at not just what they're going to save by waiting potentially, but also what they would lose on paying that higher interest or higher cost over that period of time of waiting for that, that specific interest rate to get there. Spot on.

Spot on.

Justice

Yeah.

Pete

I definitely agree with you for that. I think that also depends on the customer's situation too. So like if someone's planning on maybe moving in one year, maybe it's not the best time or maybe they should, you know, not refinance or, you know, depending on their situation, if they are okay with, you know, waiting a few months.

And it just depends on what's, what's happening, you know, with that particular customer.

Justice

A hundred percent. I think you've got to take every scenario, every family uniquely to their situation, because as you put it, like if someone's going to be purchasing a home in a year or in six months, and right now they're currently occupying their home, terms are going to be so much better if you're financing the house as a primary residence, when you're living in the house. And so if you're refinancing now, while you still own the property, like don't pay higher interest and then, you know, move and then go, Oh, I'm going to go try to refinance that primary residence loan.

Cause now it's a rental loan. Now it's an investment property loan. And so terms you're going to be offsetting that, you know, based off where the market's at.

So it may be, again, there's no one size fits all in this industry or for every family, everybody runs their finances different. Everybody has a different scenario, different plan. Hey, I'm going to switch jobs, you know, in go self-employed, you know, next month, maybe we should be looking at how we can get you qualified for a loan before you change everything around.

Pete

So what I heard you say, there's two things there. The first one was if they know they're going to go self-employed, if they're going to be making a big job change for sure, take a look at that refinance because you can get that payment lowered. You may have maybe a longer waiting period to recoup, but it might make sense because you are taking that big leap into self employment because you're at least two years out before you can get another mortgage.

Justice

Absolutely.

Pete

The other situation I heard you say was if you plan on turning this house into a rental property and you want to buy another primary in the next couple of years, well now would be the great time to do the refinance because you can take advantage of the lower interest rate right now. Don't wait until you want to purchase or maybe you purchase and then refinance later because on an investment refinance, if it's an investment property, that interest rate is going to be at least 1% and a lot more expensive, higher than what they could as a primary.

Justice

Absolutely. That's just where knowing your situation, when you work with someone who's like, Hey, what are we actually considering here? I think the biggest challenge, and I'm like, don't want to beat up too much on online lenders, so to speak, but like majority of those people are about the deal.

It's about, you know, how can I get a deal in? How can I meet my quota? How can I go out and get another paycheck or get an additional commission versus working with someone who's actually going to try to make a decision for you based off your family and your scenario.

And that's the biggest difference, right? You have someone who's going to look at what you're aiming to accomplish, look at the market, piece all that together and go, here's what actually makes sense for you and here's why we would do it or here's why we would wait. Here's why it makes sense and here's why it doesn't.

And being able to actually be honest. I mean, that's what everybody wants. They want somebody who's going to leverage their expertise in their industry to actually make a beneficial impact in their family.

Pete

What are your thoughts on appreciation over the next year, two years, three years? What are your thoughts on if someone's on the fence of their first time buyer, do you think that they should get in as soon as possible? What are your thoughts on just the overall general real estate market?

Justice

Man, there's a few different thought processes. I mean, the first one I'll take is first time home buyers or somebody that's maybe renting or getting into the housing market. I'd say our current market benefits first time home buyers the most.

And if I rewind a few years, go back to 2020, 2021, which I think is the level of intensity as interest rates continue to come down. I think we have multiple bidding war options and like that, that's what's ahead. It may not be to the same level or degree, but the biggest people that were hurt during that time, in my opinion, were first time home buyers.

They were the ones who like didn't have the cash to be able to compete with other people that were putting as much money down and could afford to go above and beyond list price. And so I think those are the demographic. They got hurt the most, which means that I think that they are the, you know, right now, the first time home buyers have the biggest opportunity.

I tell first time home buyers this all the time. Your first home will be the hardest home you ever have to buy. Like once you get into the market, once you get into your first house, things get easier from there.

You've built equity over time and you have the ability to leverage that to get into your next deal. So you might feel like it's a lot to put 3% together. I get it.

I was there one day not too far back in the rear view mirror. At the same time, like your first, if your first one's going to be the most difficult, typically getting into that first house with zero down programs where sellers are actually open to that, putting 3% down where you can actually still compete sellers maybe are willing to offer concessions to help you get into a house. It's a much easier barrier to entry.

And I think that's a huge benefit as far as like home appreciation and everything else. All the data is pointing that even in our current interest rate environment, homes from a national perspective and most local perspectives are still appreciating steadily. And so I've saw some different reports out recently that so far, like this year we're on track for like four and a half to 5% appreciation.

That's not too bad in a good market. And I think that all of that, especially with our limited supply for where home inventory is, that we're going to see quite a bit more of that as interest continues to come down lower. They've done estimates where if interest comes down, I think it's a full percent than a million more home buyers in the country are going to be adding in.

And if you think about just simple economics, supply and demand, right? Where you see that much more competition that it's going to bring, which is going to pressure home prices up. It's great if you own the home.

If you're on the other side where you're like, Hey, interest is lower, but now I'm having to compete and actually pay more for the house. It's you're obviously on the other side of the coin.

Pete

Yeah. What I heard you say was, and I remember this in 2020 and 2021, you had first time home buyers that just could not figure out how to get into the home because there was so much demand. So many people that wanted to buy, everyone that was putting offers in a lot of them had maybe cash or a lot of them had equity from another house they were selling, or it was that second third home that was easier for them because they had a down payment.

But those first time home buyers, you know, there's a lot of first time home buyers that were able to, but they paid $20, $30,000 more on the home than what they in a market like this wouldn't necessarily have to, to make it simple for a first time home buyer, which world would you want to live in? Would you want to pay an extra offer on a house where there's five, six, seven offers and you're having to go 10, 20, $30,000 over the asking price, or would you rather pay a little bit higher interest rate and get the home for what it's costing today and not having that bidding war. Again, it's not this like what you're saying earlier, it's not everyone's going to be different.

And so, you know, it's, there's, I don't think there's a right or wrong answer particular for first time home buyers, but it's not a bad move to make the jump and buy, buy your first home.

Justice

A hundred percent. I think looking at your situation specifically, like getting into a house doesn't mean that it makes sense for absolutely everyone because financially some people may not be ready in this economic environment. They might be not be stable enough in their job.

They may not have enough income where this actually makes sense. They may have some things that are going to be changing. Maybe they're thinking about moving somewhere else and moving out of the area.

Maybe all those other variables mean it's not the right time and that's okay. However, if you were to look at it specifically based off the market and you're qualified in both markets, I think it's a much better idea to purchase now because you lock in a specific price for a home based off where things are at. You can always change the terms of the loan later.

Pete

I think a lot of first time home buyers will benefit from this conversation that we're had to actually help them make that decision one way or the other, whether they should pull the trigger or continue to find a better time for them to purchase, right?

Justice

Absolutely.

Pete

The election's coming up and I don't want to get too political, but there's a lot of people I think that are uncertain and it's kind of an uncertain time. And this happens every four to eight years or every time we have an election, I think people are on the sidelines sitting around, not necessarily making big financial moves like purchasing a house. What are your thoughts on that situation?

Justice

Yeah, I think having a little bit of context to have been in the industry long enough to be having conversations, I've noticed a pattern over time with clients that around these types of elections, presidential elections that there's definitely is uncertainty and it's like, what's going to change? And for me, I think that it's number one, understanding and have an empathy. Like I totally get it.

You know, I think that's where it is that I start that there is some uncertainty that's there. And then, you know, my curiosity leads me to ask a question like, what do you think is going to happen? What do you think that means to you and your family?

Sure, things change, but like, what does that mean like for your business or what does that mean for your family? If it, yeah, for your employer, does that mean that you think you're going to lose your job? Does that mean that you feel like you're going to have your hours cut?

Does that mean that you think that the world's going to collapse and crumble and everything ceases to exist because one party gets elected versus the other? And I, and I'm kind of being cheeky with that, but as I've kind of probed a little bit further, I think the question actually comes as like, I'm really not sure what I'm afraid of. I'm afraid of the unknown.

And I think where I can have empathy and understand that seems to be a very, I don't know, not the place I'd recommend making strong decisions from. And I can understand where people are going, well, I don't actually know what to expect, so I'm going to wait. I'm going to put off what's there.

And I would say that the benefit of that is that there's probably a lot of other people doing the exact same thing. And when everybody else gets on the other side and they realize that the world is still moving, I still have my job. The economy is still going, everything's still happening.

Now I'm going to get on the other side and I feel like, okay, we'll go put the offer. Well, if you act before then while everybody else, because if you pull yourself out of the emotion and look at it from a logical standpoint, you're like, life's not going to change that much. And if the world implodes, then like, we don't really have to be worrying about the fact that you bought a house or not.

We have much bigger things to consider at the end of the day. And so transitioning from that, I mean, I've had many conversations. It's like, how do we understand?

People are leading with their emotion and I totally understand that. And I think that, I mean, in simplicity, I don't think that there's a whole lot of logic behind that. And that's fine.

Like we're human beings and that is what it is. But I think at the end of the day, election is going to come, it's going to go, life is going to continue to keep going on and they're going to be impacts over time based off of monetary policy changes and economic changes, depending on which party. But is it going to make a massive difference based off of what home appreciation happens?

What, you know, what happens with your job and in your local market directly? I think that that's probably given a little bit more power to a political candidate than they actually have.

Pete

I agree. You know, at the end of the day, people still need, are going to still need housing. People still need a roof over their head.

People still need to provide for their family. And so life's going to go on. Anything else that you want to talk about?

Justice

Man, this has just been a great time. I appreciate you having me. It's a great time just hanging out and talking, talking the mortgage industry, talking like things that I get to talk with clients every single day.

And I think it's cool to share in kind of a forum like this. I think it's cool understanding the market, really demystifying kind of like what happens behind the scene in the mortgage business. What does the market look like?

And I think that, you know, if there's one message that I would want people to hear is like, it's not as scary as you think it is. Like, do you remember back to the day when you were first learning how to drive a car? And you know, I remember it was kind of scary.

It was like, you're trying to think about all these different things. How do I remember to signal and lurk left and look over my shoulder and you know, look at my rear view mirror and everything else and understanding that it's like, of course it's going to be a little bit scary the first time that you're doing something, but realizing that it doesn't have to be that. And what's unique and what's really cool about this business and why I love it so much is that I get to come along people that haven't done it for the first time or want a unique perspective because they've had a bad experience that I had someone who always just did it for the deal and having someone who represents them as someone who actually cares about their situation, wants them to make an informed decision and wants to actually learn through the process that it doesn't have to be that scary.

It doesn't have to be something that you don't do because you don't understand or that you kind of feel like all this pressure to do, but you don't really understand what you're making the decision on. And so to collaborate with someone and to feel like you get to be an advocate for someone as they move through this process, I think is just a huge joy. And that would be my encouragement is like, don't be afraid of mortgages.

Don't be afraid of buying a house. I mean, don't be afraid of taking action in maybe an uncertain time. So that's my message today.

Pete

I love it. And don't, don't be afraid to ask questions. So Justice, dude, thank you so much.

The other thing I didn't actually talk about is, is, you know, we met down there and you know, we've been working together and, and bro, I've learned a lot from you over the last three or four weeks. And we now work for the same company and, and I'm super excited to work alongside each other, basically cheering each other on. So it's super, super meaningful for you to be here and for you to have done this with me.

So thank you. Thank you very, very much. If someone wants to get ahold of you, how do they get in touch?

Justice

I mean, reach out. If you want to look on social media, I'm at Justice Loan Officer. So that's nice and simple.

If you want to get ahold of me directly, our office, you can call 206-326-1802 and reach out. We love to have a conversation. We love to get to know people.

And whether you're someone in the mortgage industry, you're someone looking for a loan, real estate agent, anyone that's in the industry and you just want to learn, you want to start investing. Like we'd love to have a conversation and just be an advocate for you.

Pete

Thank you, bro.

Justice

Absolutely.