Interview with a Lender; Mortgages - how to get a mortgage, what is a pre-approval letter, & more.

Interview with a Lender; Mortgages - how to get a mortgage, what is a pre-approval letter, & more.

Hey it's David with Bain Residential here today with Zander Blunt. He is the branch manager for the 6th Street Prime Lending
location, he's also an old friend of mine but more importantly he's very
experienced in the lending field, originating loans, and working through
the financing process with not only my clients but hundreds of others. He's been
in the industry 15 years or over 15 years and he's a great asset to us
at Bain Residential and like I said many others in his network. So Zander
it's good to have you here today thanks for taking a few minutes out of your
time I know you're busy. Happy to be here David. Thanks for the intro. I've been at Prime Lending 16 years. I've been the industry 20 years. I have a team of three
people. Me, Stephanie and Nathan and we originate residential loans. We have,
we're backed by Plains Capital Bank and Hilltop Holdings. We are a bank not a
broker, it's very important designation these days.

We've got a six billion
dollar warehouse line which is very convenient in times like these when a
lot of lenders have a big liquidity crunch, we've got capital to lend on
pretty much any kind of product, the bulk of the lending we are doing these days
are conventional for people either looking at cash of equity. Right. You can't lower the rate on a current term of a 30 to lower rate or switch to
a 15 or 20 to pay off the rate faster.

What's your typical
client? You mentioned some refinancing that you work with all all clients in terms
of first-time buyers up to luxury or multiple properties right? Sure, well being the business so long we've got a huge list of past clients and I'd say about a third of our business is past clients coming back to us for another
purchase or to refi. A lot of our business is
first-time buyers here in Austin but we loan nationwide so I do a lot of loans
out-of-state I'd say 90% of our business is here in Austin around Texas we work
with a lot of investors as you do as well for buying their first or multiple
condos, single-family homes, duplexes, fourplexes. We really enjoy the investor
deals because it's typically as a seasoned investor a buyer that knows
what they're doing you don't have to really start from scratch the same time
I think I enjoy the calls the first-time buyers the most because they don't know
anything about the process of getting a loan and in the end of the day whether
it's an experienced by our first-time buyer it's the same three things its
credit, income, and assets and that has not changed
what is tighten a little bit is it you know whenever you have a liquid any
crunch for the market is being tested you better have good credit you better
have more assets and you better have pretty strong or identifiable income
right I work with a lot of self-employed clients seems to be the nature of Austin
it's very entrepreneurial town and where are we come into challenges is you know
it can only it can work against you when you file your taxes you're self-employed
you have the luxury of writing a lot of stuff off that doesn't get you very far
none writing so as I've become pretty adept at decoding with complex tax
returns to turn that into a qualifying income amount for self-employed
borrowers we do a lot of jumbo financing not a ton right now because the products
are a little limited mainly to a seven or ten year arm the fixed rates are a
lot higher right now than they should be and a lot of our investors have pulled
products off the shelf that will probably be gone for the next three to
six months but we do have in-house products on jumbo and we lend up to
three or four million and and he seems like a huge number but Austin has grown
up pretty fast where there's a lot of money in this town and we do a lot of
those bigger loans as well so we also do government loans we do FHA loans bond
loans for downpayment assistance for people that need downpayment
assistance we waive all our lender fees for veterans.

So we've got the
entire product suite that really any lender could offer and when I take an
initial call with a client we usually try to show them explain the process and
how we like to work and then give them a bunch options to find out which loan
product will fit them best and then break down how the appraisal works.
What a title commitment is, what their closing costs are going to be, and then
set expectations as far as best way to get us their docs. You securely upload
take applications online try to make it as easy on the clients as possible
because you know that whenever the government gets involved in regulating
your industry they don't make things easy so we've tried to work against that
time to offer a lot of technology tools for clients to qualify and get
pre-approved very quickly and if we have to close financing in a very short
period of time we can do that.

Right, that's one of the things I love working about working with you and your team is is the the tools you use make the
process very simple for my clients it's quick to get pre-approved and to
run those numbers and very responsive And you know Stephanie, Nathan they're
they're always to jump on a phone or it's a quick email as are you of course
but to make sure that all their questions and the anxiety around this
process is managed as best as possible because for a lot of people especially
first-time buyers there is a lot of anxiety about having their their
finances and and that such opened up and and very literally be judged. They're taking on the largest debt and acquire the largest asset they've likely ever
ever purchased so it's reasonable to have anxiety going into it and once they
realize they've got a good agent a good lender and we're all on the same page
and those expectations are laid out it tends to work pretty smoothly that you
know this business imposing thousands of transactions you
learn something new every day do you think you know you're reminded a little
know about real estate on a daily basis and it's it's humbling and educational
to see some wrinkle you didn't think of or come across, so you learn a little
bit new on each deal, unless that's one of the things I love about it.

Yeah and that's what the experience I think you said thousands of deals you know you're
able to bring that experience to the table so if I'm in something new comes
up you can at least pull on some experience of how to approach it based
on other factors and whatnot and you had mentioned working with the agents and
you know my side it's working with the client and the lender and and having
that team network which is one thing again that I enjoy working with you guys.
When someone is coming in when is it a good time for somebody to start looking
at financing? You know I get a lot of calls like 'Hey I'm ready to go look at
some houses and this and that and first thing I always say is how how are we
looking on your pre-approval and you know what's your take on that I
certainly know what mine is and that's that you need it before we go out
looking but you know why is that important Well if you go under contract
without really knowing where things stand on the financing side that's not a
good thing so yeah I you know I had people that call me in a panic at ten
o'clock on a Friday night saying hey I found a house and they haven't applied
online I've never even met them before and we can still get a pre-approval
letter out that night or in the morning because it is pretty quick to do.

I mean
we can do a pre-approval over the phone, take our application online, but it's
never too early to to fill out an application and have a hard credit poll.
People get worried about it lowering their scores and they use apps
to stock their FICO scores but what we find a lot is there's hidden things on
your credit report like collections that don't show up on soft score apps and you
think you got a 780 and I go to pull it and it's 670.

Collection can cost 200
points. A lot of the education we do with with initial people applying, is really
to how to analyze a credit report and what FICO scores are, when to pay your
credit cards. Right? how to manipulate your scores to
maximize. Y know your scores are the biggest determination of your interest
rate. In a debt-based society that requires your credit to determine your
interest rate, it's very important to have strong credit but a lot of people
don't know how the system works and that's by design.
We recommend paying your credit card bills 7 to 10 days before your due date
because that's when they're reporting your balance, so if everybody says they pay their credit cards each month and they're paying it on the due
date each month that's showing a full balance due. The credit card companies
have always used to warrant charging higher APRs and suppress credit scores
so, you know that's when you go back things you should have learned in high
school or college that's probably near the top of the list but they don't teach
you that.

You walk out of English class in college and somebody is
it giving you a pity master card with a $5,000 limit you're gonna max that thing
out and deal with the damage later, but your credit starts good, then it drops
due to negative events so credit is a lot of things we work on. And your
interest rate is going to be affected in 20 point Fico tiers so ideally you want 720 ficos or higher.

There's three bureaus: Experian, TransUnion, and Equifax. We drop
the high in the low score and we've locked the interest rate off the middle
score. If there's two people on the loan, a husband and wife, we're gonna take the
lowest middle score so there'll be a lot of times for the husband has the 780, no,
the wife has a 780, the husband has the 680
The wife always has higher credit. Women always have a higher credit
which is makes zero sense but they use debt more responsibly and they use it
more often and that generates higher FICO scores. So we'll
drop someone off the loan if their lower rate of the lower FICO score is going to
cost them a big rate increase. Right. But every 20 points that your FICO score
goes down, your rate goes up an eighth of a point, so say they
go from 740 to 680 that's a half point swing and your rate that could cost you
$50,000 of interest over the life of the loan.

we start with a lot of education about how FICO scores work, why credit you
know when people bark at us pulling credit we don't know what's on there and
if they may have a perfect credit report if you have strong scores, a hard credit
pull will not hurt your credit. Maybe two to three points. It's not going to change
much. A then it comes back pretty quick Now within ten minutes. And it is smart to freeze your scores to prevent people accessing your
private info and you can unfreeze it. We'll pull it you can freeze it again.
That's a smart thing to do it keeps your scores in time.

We can help
client get rid of collections that are on there. There's a great company we use
in Dallas for that and we can do it during the loan cycles, so if there's a
surprise that comes up that we didn't know about, we can usually get something
in 30 to 60 days. So that's the credit piece, then we take a close look at
assets. We want to source the bank statements for the last two months and
any and all asset accounts for season funds. If there's any deposits that
happen during that 60-day cycle we're gonna look at it and make sure it's a
valid source of funds for down payment. A lot of self-employed business owners
just assume they can use funds and their business accounts to buy houses and
that's not always the case.

That's always a surprise for people and they've
said 'what are you talking about, it's my money, it's my business,' but there are
other hoops you have to jump through to be able to use those funds. Right. So assets is a very, you know, save money before you have to buy off you need at
least 5% down on a conventional loan. There are still some 3% down products
available but assume 5% down and if you can do 20% down then you don't have to
pay mortgage insurance and mortgage insurance is something we do a lot of
these days with rates so low people are choosing to put minimum money down 5 or
10% instead of 20 because that mortgage insurance payment which is rolled into
your monthly principal and interest payment drops off as soon as you get 20%
equity. So in Austin where properties appreciate 6 to 8 percent per year,
you're only going to have MI for 1 to 2 to maybe 3 years if you do 5, 10, or 15
percent down.

Yeah Then it just dropped it goes away. You order an appraisal, show
it to the lender ,you have equity and it drops off. So we're doing
far more single lien financed loans rather than first and second liens that
we used to do a lot knowing that properties appreciate quickly and MI will
drop-off. So then it comes to income and I probably should have started with that
because of the the the pyramid of credit. Income and assets, income is by far the
most important since the Dodd-Frank Act was passed. They designated loans QM
or non-qm, qualified mortgage or non qualified mortgage. You want to have a QM
loan. It's all about the ability to repay the loan, so they highly scrutinize
income. In your w-2 salary, there's not a lot to decode there, but for
self-employed borrowers any decline in income of more than 10% has to be
sourced and explained and they can decline your loan for any reason.

there is declining income and if you're self-employed, your income is never
consistent so what we like to see is inclining income or at least stable
income, but we also see a lot of complex tax return structures where
people around entities one may pass or another where they're taking a big loss
here that they assume is not part of the transaction but we have to count
everything and it all flows back to the adjusted gross income on their 1040. And
that's typically what we are gonna use. We use your AGI, not your, not your gross
income, or your k-1 income that you made from your distributions from your
business. We're going to use after write-offs and that's usually one of the
biggest challenges we face so I'd say the first thing I always ask client is,
'Wow are you compensated? Where do you work?'
We look for a two year income in a two year housing history so we got to verify
your rent or your mortgage for the last two years and your employment for the
last two years and there's four to five levels of employment verifications days.
Six now thanks to Covid Yeah We're verifying the the employee is still active and working and making money on the day we're
funding their loan.

And if you're self-employed you have to
provide invoices and other things to show you were actively working so
Covid has introduced some new steps, but this is a temporary hurdle. We'll get
past it and we'll go back to the old way of doing business which is just going to
be credit and income and assets. And that's the part of the process I enjoy
and explaining to a client and figuring out what they are pre-approved for and
I'd like to sort of start with what the client what they want their budget for
their mortgage to be and then let them know what price range they could be
shopping in. A lot of lenders look at their income and say 'oh you could buy
seven hundred thousand our house,' but you'd be maxed out every month and not
saving any money. I usually start with asking what do you want your
monthly mortgage payment to be factoring in principal, interest, taxes,
insurance, mortgage insurance… Find that range then I come back to to you say 'Hey
David, they should be look they want to buy in Circle C $550K is their ideal price
point, they got 10 to 15 percent down, let me know when you find a house
I'll send over a pre-approval letter.' Yeah, which is one of the things I really like
about the way you guys handle business.

It's exactly back the courts. I have worked
with other lenders and it's it's been a hit they're approved for this way well
that's not what that's not what they're looking for here in terms of budget so
having the knowledge that yes they prefer, you know the $550K, but if
you need to stretch to $625k, or whatever we know ahead of time that
that's an option. But that's not, you know, that's not what we're going for.
I think that's great, it's a nice approach you have with the clients and I know
my clients appreciate that. Let me ask you this. When we're looking, a lot of
the times, you know, everyone's looking for the lowest interest rate, and of
course, one of the big determining factors of how much the loan losses is,
yes the interest rates in there, but also the time factor in it.

15 verses 30 and
that sort of thing. A lot of times I suggest you know if you can pay it off
quicker that's better. Because you are gonna save a lot of money, but how much will it change in the one point, one percentage point, or a half
point, effect overall the amount spent on the loan and such over the course of a
lifetime? Well I'd say most of our clients default to a 30 or fix they
don't want to be tied to the higher monthly principal and interest payment
that a 15 year and 20 year offer but I have a minority of clients that are
loyalists to a aggressive amortization schedule for a very good

If you go on and pull up an amortization schedule and
compare the total interest savings from 15 with 30 or fixed it's astounding. The
reason why Wells Fargo and Chase have trillions of dollars or at least did few
months ago is because of the interest you're paying over a 30-year mortgage.
It's insane, especially the way the loans are amortized to stack all the interest
upfront you're not chipping away into that
principle until really here's five to seven to ten so the beauty of a 15-year
fix is you're hacking into that principle right away. Here's a
good way to meet in the middle. Right now a 15-year fixed loan is 2.6 to 5 percent…on a conventional loan. 30 years at 3.25. Those are insanely historically low rates to
where… on a 30-year it should free up a little extra cash to where you can make
additional payments and pay off the loan a little faster. Now people are naturally
not very disciplined, as we know David, and they're not gonna make those extra

15 year or 20 year forces you. You gotta make of that but for a lot of our
clients here in Austin they have young families, they need to save for college,
they need a nest egg, we do a 30-year fix. And I just say, 'hey make three to
four extra payments per year towards principal and it gets you down to a 23
year fix, instead of a 30.' But I really love a 15 year fix if you can
swing the extra monthly payment because it saves you so much extra interest on
the life alone. Yeah it absolutely does and then like you said if you have a 30
but you're like 'oh some money was left to me' or whatever you can pay it down quicker and kind of knock some of that out. And then
as you mentioned with rates as low as they are, I mean it's pretty darn close
to free money when you take into you know inflation instead all things being
equal that we'll see we're all that ends up, but you know, it's a good
time to buy.

It's a great time to buy, it's a great time to refi and one of the silver linings of a global pandemic is shifting the balance of a seller's
market back to a buyers market to where we finally have a little leverage. You
know when you get a listing, that you're gonna have multiple offers very likely.
And you get to pick which one you like you know 'this is cash, this is.. I know this lender,
no, this is quick and I'm not going with that,' but on a buyer's market you know..
This is not a buyer's market because there's not enough inventory. There
are other problems with being in a buyers market where things just don't
move, and you have your pick of the litter, but they're not gonna appreciate.
I like evening the balance of power a little
bit to where, you know, you can negotiate a little bit right and that's
something we're starting to see come back in the last few months is the
ability to offer a fair price we're a fairly listed house and not go 50 grand
over asking and then run into appraisal issues.

You can make some deals now and
you know further we have a lot of investors that are lying out there cash
ready to make some investments on the residential and commercial side whether
this always creates a lot of opportunity. 2008 created a wealth of opportunity for
people that made a lot of money investing in commercial and residential
real estate and this will be no different. In fact this will be a bigger
opportunity because this global economic downturn is going to last a lot longer
than the one in 2008 did. We lost 800,000 jobs in 2008. We've lost 21 million in
the last two months. It dwarfs 20 times as much. This is going to take two
to three years to recover from and it's going to change how we live our lives. In
a lot of ways, how we work, how we spend our money,
how we invest our money and Austin real estate is going to remain a very safe
and lucrative place to park your money.

Yeah, we're very well positioned I was reading
in Forbes this morning of the number of markets expected, you
know, withstanding the recover from this this event and Austin was up there. It's,
we just have a strong underlying infrastructure that really creates a lot
of strength to our market. You mentioned something about the appraisal and
running into appraisal issues and people under multiple
offer scenarios and all that good stuff. And unless they are, you know, the
partially waived then the you know it's got to appraise from your point of view from
the approach for the the lender. Tell us a little bit about how that works
for the lender, with the appraisal and why that's important and what they're
looking for. And why you want it to appraise? Appraisal is a critically
important part of the deal.

I mean the market is going to set the
price for house what a buyer is willing to pay. That's classic macroeconomics, so the lenders need some third-party way to value a property to know the
collateral they're lending on. We use an in-house panel of appraisers, that
we've used for 10 years of 10 to 15 people in Austin and surrounding areas
to identify comparable properties that have sold in the last year.
Ideally last six months but up to a year within a mile of the subject property.
Sometimes you have to go further out if it's a unique property in in subdivisions
in Round Rock or South Austin or North Austin where there's a lot of comps
available appraisals are easy, but we see a lot of tricky appraisals.

We have to
lend off the lower of the sales price with the appraisal value. So let's say
you have a listing in circle C and there's eight offers and a bid up the
the contract priced $50k over asking you're gonna end up higher than
the comps are gonna support this individual deal. The client has to make
up that difference with a bigger down payment or we have to finance more and
hope you have the equity to do that, or the loan product to do that, so the
appraisal process is a critical component when negotiating the deal
upfront explaining to the client how an appraisal may affect underwriting. We
still see appraisals coming a little short every once in a while and a lot of
the times people don't blink they just pay the difference.

It's awesome they
know they'll make it up. I see deals fall apart over three
thousand dollar shortage on our appraisal. A thousand dollars just
completely insane stuff that you wouldn't think would derail a deal but
you know people call their bluff and then walk on on an appraisal shortage of
two thousand dollars. You've seen it all. But the appraisal is designed to give
some third-party valuation and the way of appraisers comp property is different
from how Realtors comp a property. Fannie Mae and Freddie Mac have their
own calculations. And the automated underwriting software that Fannie and
Freddie use are now generating property inspection waivers.

So if I get a deal
that has a lot of equity or a big down payment on half the conventional loans,
were right now I don't even need an appraisal. That means I could close the
deal in three weeks. Well you and I did a deal like that recently. Yeah it's coming up more and more often which is also due to
Covid, but I'm hoping that they keep that finding, because Fannie Freddie used
County data census data a collateral data from CoreLogic and and other
third-party stuff and they can assess a risk valuation and if they if the risk
is acceptable and they feel like the property's fairly valued, you're not
going to need an appraisal.

That saves the client $550, it
saves us a week or two off our closing time, and we could turn and down around
deals really fast. Yeah it takes a lot of anxiety out of the deal also on both
sides. I mean even if you know your property is going to appraise and your selling it,
they're still, yeah who's this guy coming in or girl or woman that are
gonna it's gonna appraise my property and do they know
what they're doing? And I've worked deals where they don't have stable
appraisers that they work with regularly.

And they put out an RF, you know,
whoever's appraised in the county or whoever's licensed in the county can
come and submit their proposal to do it in time, and all this, and you may be
have a luxury listing and they're sending an appraiser that's never done a
luxury property or an investment property or whatever it is. So y'all
having having people you work with regularly doing that, it provides a lot
of confidence for not only the seller but the buyer as well. So that's that's
definitely a big positive. Of course another big process that
is running the title documents and getting the schedule B and you know
just the title process, generally speaking.

How does from a lender's perspective,
what are the things that you're looking for in the title process in a
title when you get it back? What are the things that could derail a deal or make
a deal smooth? Well the reason Texas is a title company state there are other
states I got in the business working in New York and Pennsylvania that are
attorney states where an attorney will run the title search and you know. In
Texas, it's a little more simple in terms of their job is to ensure clear title
that there's no outstanding liens in the property,
there's no mechanic's liens, there's no and the liens were properly
released and recorded. So we work with a lot of different title companies in town
and we generally let them do their job and run the title search. When we go to
underwrite the loan we'll review the title commitment. We have to get a
survey as well on the property that usually conveys from the seller.
Sometimes we'll order a new one which is never a bad idea to have a current and
accurate survey.


And the title company has to ensure the survey against any
easements or any you know coverage issues. So we definitely look at
the title commitment on schedule B/C to make sure there's no outstanding
liens but I would say that is a process that the buyer typically doesn't get
very involved in, because part of their closing costs in fact the largest part of
their closing costs are the title fees. And in Texas, the seller pays the title
fees. When you're selling a house it's a big it's a big component of it so the
title business has some very old way of doing things that is right for rebooting
so to speak.

There are some new companies doing that and they're doing a good job
of it but you know there's a lobby that is is designed to keep the
total company of charging these very high premiums which are state regulated
right but they're really high margins. And for example refinancing you have to
reissue a title commitment on property you already own and RDS clear title and pay
$3,000 in title premiums. It's a lot of money. So it's often the biggest
part of a costs refinancing just reissuing the same policy. But as far as
the client goes that process is pretty transparent and over here compared to
the actual lender underwrite of the loan. Right, yeah there's aspects that we
definitely look for as a buyer and in the Title and schedule B as such, but from
your perspective it's pretty cut and dry from what you are saying.

How is Covid-19 affecting your business now? What are you seeing in the market? I mean
we've got a lot of stay-at-home shelter in place directives… those are loosening
up. Things are opening back up. I know what I'm seeing which is, it's almost like
some recently the last week people started open up a floodgate a little bit
and the buyers like all right now we're gonna go look, let's go. A lot of
activities opening up. What do you see in the market? Well we're a purchase
centric company we've led the state of Texas consistently for the most purchase unit so
we value our realtor relationships to drive that business.

Refinancing we've
always looked as low-hanging fruit when the rates are low, go get it and help the
client save some money. Past client new client we're always gonna help people
refi, but we focus and prioritize purchase business. This spring is usually, you know, spring
is usually the purchase season people like to move based around their school
years. So Spring and Fall are the busy times of the year. Summer and Winter usually a
little slower. Now December, for some reason, is always a crazy busy month
because people like to get things done before the end of the year. But in
general, we're doing a lot more refi-s than purchases right now because people
just have things on hold. There's a lot of uncertainty in their job market and
their savings and their 401ks. I would not look at your 401ks right now.
It's taken a big– it's going in the wrong direction. The stock market has
recovered pretty impressively from the drops we've seen. But the way that Covid
is directly affected lending really comes down to A) are you working? If you're
not working we cannot lend you money.

If you're furloughed, if you're laid off,
you're not going to get a loan. It's plain and simple. When you go back to
work and you're on a salary, we can do financing. You can buy a house, but
if you're self-employed it's tricky. A lot of people's incomes are down. We have to provide P & Ls and balance sheets for year-to-date income. If you haven't made any
money it's gonna be hard to get a loan. Verifications of employment… we're doing
early and often and throughout the end of the loan life cycle. To make sure you
are still working, we already touched on appraisals, getting appraisal waivers and
then safety issues for how appraisers are getting in properties. We're allowing
drive-by or desktop appraisals on a lot of deals that don't require a physical
inspection. How are we handling the closings… there are a lot of hybrid
e-closings right now and in the very near future we'll be rolling out a fully e-close
product called an RON or an RIN and where a notary is witnessing you signing
the docs that need to be recorded by a witness for the deed and the note
recorded with the county.

But on deals that we recently closed it's been
incredibly convenient to the client to be able to get a link that morning to
e-sign 90% of your closing package which we know is 80 government documents that
are very redundant. Then the important ones, a notary will come by the house and
take care of the closing that way or you can run into the title company and very
safely sign those few documents that get recorded, that need a witness and a
hand signature. So we're gonna continue to evolve and look to technology
to fill that void. And then I think what this is going to do is force the
introduction of for investors to accept remote online closings or electronic
closings and purchase those loans. The biggest hurdle is spend the investors
willing to buy those loans and hopefully this will force them to adopt it faster
so that and that will change the title business. We're still gonna have to do
title searches but are you gonna have to go into a title company to sign your
whole closing package? No, so title companies will be forced to find value
in other ways or still coordinate your remote closing.

How do you think that forbearance is that having an effect
on any business you're doing directly? And do you feel like it's gonna have any
effect on the industry in the next 3-4 months as we started to see some of the timelines run up and people still have a mortgage and then may or
may not have the their job back or off furlough? They still
have a mortgage and they still have to pay it.

Forbearance is not directly impacted
most of our clients. Certainly is going to impact a lot of people. Millions of
people will go into forbearance. It's something you really want to avoid if
you can do it. They're offering that option, but you still have to pay it back.
You're basically waiting late fees. You're just having mortgage payments
stack up. You're gonna have to pay that money back
and that forbearance will show up on your credit report.
You don't have late payments but it will show a loan in forbearance, you can't go get a
loan for a while yeah and they may have to modify that rule, but it's gonna be
very difficult to go get a new loan.

If you're a lender and you saw somebody
that recently went in forbearance or you don't want to lend them money for a new
mortgage? It's something you really want to avoid and
it's a last resort if absolutely needed, because you just
simply don't have the money to pay your mortgage. And a lot of people don't right
now it's a very tragic situation. A lot of people were in that have lost their
jobs they want to keep their house so this is the the best means to do it,
they're just gonna be staying in that house for a while playing catch-up on
their loan rather than selling and buying a new place. Right. Do you feel
like it's gonna cause any constraint any further constriction and lending? Just
because your investors, you know it's trickling up.

Yeah it will. There's
gonna be a lot of banks that go under and you know this is where we're really
lucky to have a you know six billion dollar warehouse line. We're not going to
run out of money, but a lot of banks are reassessing their their risk tolerance
right now. And they don't want any exotic loans. They're not doing investment
properties, their not doing cash out refi, or jumbo loans. They want clean
loans on their books that they can service and resell. To the government. Yeah and the government is the backstop so there's going to be a massive
trickle-down effect and wherever there's a kink in the system it affects
everybody downstream. And we don't know yet how this is going to play out. All I
know is it's gonna cost trillions of dollars and it's gonna take years to fix.
So there's going to be some markets that suffer a lot worse than ours, but Texas
is, as an economy, is very sensitive to the oil and gas industry.

If you've
looked you haven't had to fill up your gas tank in a long time but gas is
really cheap right now. You know, gas is like a dollar
thirty a dollar forty a gallon. Well that trickles down to a lot of incomes for a
lot of people especially in Houston, but as all gas gets distributed throughout
the state now in aw in dallas-fort worth especially West
Texas is hurting right now they've had a boom cycle for ten years on the Shale in
West Texas. Whenever oil and gas suffers, the overall
real estate climate in Texas suffers. Austin has been a little bit of a bubble
in terms of just having checking off so many boxes for people.

Low unemployment, a
broad range of different industries desirability, people want to live here. It
is generally the cost of living is affordable compared to California or New York. There's no income tax, you know, federal
income tax, we make up for that with high property taxes but still the cost of you
know it's not what I call an affordable town anymore compared to San Antonio, or
smaller towns are on Texas, but it does have such a high overall quality of life
that we will get through a global pandemic related downturn a lot faster
than other markets. Yes, we certainly will. And when you say, you use the word 'bubble,' I want to clarify. I think not so much through it's a bubble in terms of the
market looking at burst and it's artificially inflated, but more in terms
of we're an island in a unique, we're a unique island where our market looks
different than the rest. That's a better word for it.

We're in it a little
bit of an anomaly. Yeah well way to make sure we were on the same page on that in
it and I think you know I agree with you and though we follow the same economist
that would agree. A wild time for sure. So you know how do
we prepare for a mortgage? I've got a client, they want to buy a house in
six months what's a good way for them to to start preparing for that process so
that when they come to you they're looking in good shape? I like to hop on
the phone with the client to just make a introduction and get to know them
develop a personal connection.

It is more than just a transaction because there's
a lot that we ask of the clients they're sharing personal information they need
to know who I am. So myself, Stephanie, Nathan or will hop on a call and then we
direct them to my website. It's just my name is They fill out
a loan app we have a secure upload tool to upload documents,
sensitive documents that they don't want to email. And then we jump on it and
review their income assets and credit. And our goal is to be able to turn
around and create any pre-approval on the same day if not within a few hours.
Knowing that our market like Austin if it something comes on and they need
to jump on an offer it may be gone. Though a lot of clients ideally have
already been pre-approved with us so the word is waiting for that text from the
realtor or the client saying 'hey I've found a house.' We plug in the specific
property taxes with that property and update the numbers send out the
pre-approval letter pull current rates, rates are fluctuating pretty wildly, the
rate really low right now, but we are gonna see volatile swings in the market
to where rates could go from three and a quarter to 3.75 in a
day or two.

You can see how 50 basis point, half point swings overnight
depending on what Trump tweets or the Fed is still propping up the market
they're the biggest buyer of mortgage-backed securities and bonds
right now and they will be for the foreseeable future. So the Fed has to
keep rates low to get out of an economic downturn right so with rates staying low
we're gonna see continued refinance and continued purchase business. And on those deals, you're still going to want to move quickly and efficiently. You don't want
to be doing a mortgage for sixty to ninety days like you have to do with
Chase or Wells or Quicken, really big banks, or the online lenders.

a lot of red flags on the online lenders. They're charging two points to lock in
your rate that can be ten thousand dollars that you don't recoup for ten to
fifteen years in your loan. That's buried in the fine print. So Quicken spends
five hundred dollars a year on marketing, and then you go to do the loan to get a
rocket mortgage and that rocket blows up halfway through underwriting because you
realize they're charging ten thousand dollars to you, well and nothing against
Quicken, it's just it's… marketing works. So they have a huge marketing budget you know. A lot of people, they're a refi shop
though, are you gonna use an online lender for a purchase?
Probably not, your loan officer is at a call center in Des Moines, Iowa.
We have the model lend locally and you want to work
with somebody that knows your market, that knows your agents, that has in-house
appraisers, that can meet you in person if needed back, when we're allowed to do
that again.

We like to attend our closings because
that's where a lot of questions come up that's where often we get to meet the
client for the first time. The odds of them coming back to you to do another
loan or to buy another house if you if you develop that personal connection. I
have hundreds of clients in my phone that have become friends that come to me
for the most random things like, 'hey I need a plumber, hey where are your kids, hey I need a divorce attorney,' you know serious
stuff, because they've shared their lives with us to get a loan and sometimes we
have to go through some crazy underwriting battles to get approved on
really tricky deals whether it's Jumbo's or self-employed or minimum down or
credit distressed you got a battle. And we're we go all in with the client to
get those deals done.

By the end of it you feel pretty connected, so
years yours later you might run into someone going like I did my loan right. So
that's something we take pride in and that we're not just here to help them
with a mortgage. I have people call like freaking out that their lenders screwed
up a deal they have to we have to fix it in ten days and close alone in ten
days or two weeks and we do that because someone else did not set expectations
properly or research the product or underwriting guidelines or they
air-balled an appraisal that can't be fixed that we can. So we have to do a lot
of bailouts right now, you know people love and trust their credit union and
it's great for a car loan or a checking account, but if you have heart failure, do
you want to go to the surgeon to do your heart surgery or do you want to work
with the intern? And that's the analogy we used with working with an established
trusted local bank or correspondent lender that has the experience and all
the tools to get you out of a major very fast right.

There really is a lot to
say about working with somebody local that knows the market, has the appraisers
and you can walk into their office you know figuratively these days, but and
know that A) hold them accountable face-to-face and that
they're there, you know, and have you back. I know that you've you've certainly each
other some hoops for my clients before it's been appreciated. And then I've also
had clients miss out on deals because they've used they insisted on using some
online lender. I'm like no idea who your lender is. You're not going to win every deal ever in any sales business. Yeah. You do your best and
you know a client may go with another bank. It may go great, there's plenty of
lenders that can close deals out there or it may not
you just hope that they call you quickly and you have time to fix it. Right. Or they use one bank on one deal then come back to you said hey this didn't go
great we got it done but we want to try you this time.

So you know this is a
service business, that lends money right You are in a service business that buys
and sells real estate you know. It takes a team of people operating in
synchronicity to make a deal go smoothly. There are so many separate individual
things that have to be done properly for a real estate transaction to go well and
close on time. The more I know about a Realtor's business and how they
approach it and how they work with their clients and how they communicate the
better I can do as a lender to help get the Realtors more business. Or help you
know if you know I'm going to get a deal done in 30 days or I can do it in 3
weeks and they're the other offer is dealing with Chase they won't be able to
do it for 60 days well maybe you don't have to overpay for the house.

gonna win it by closing faster. That saves your client money sure there's a lot of different ways to win the deal. And we have a
lot of strong relationships in Austin and out-of-state that we've developed
with investors that knows we're gonna be able to execute. And if you go under
contract to buy a house the number one job required to do is perform on that
contract so you're not in default. Second, is getting the best terms.

So there's
people that call and shop rates all the time and rates and fees are very
important they have an inverse relationship. If you're gonna get low
fees you're gonna have a higher rate. If you're gonna have a really low rate
probably gonna have higher fees. You want to find the sweet spot in the middle and
rate always wins over fees, which is why you know Quicken gets away with charging
two points and people do it. So you know there's always a
little bit of a give and take but at the end of the day if you trust your lender
that they're gonna look out for you to get the deal done on time that should
outweigh a difference of an eighth or a quarter percent spread in interest rate.

We're not always gonna have the lowest rates. There will be a credit
union, there will be a big bank that wants to go low and buy up it's a city
for six months. There will be someone that has a lower rate that you were
generally going to pay the price somewhere in the process whether it's
the appraisal, whether it's underwriting, whether it's deep missing your closing
date. I mean most of the stress involved in your life is did the appraisal
coming in value, or is it on time, and are we gonna hit our closing date.

So after
you've done your job of finding the house or you've gone under contract on a
listing it's up to the lender to perform. And as you know of the 200 lenders in
town there's only about 10 that are any good. And there's 10,000 realtors in this
town I'm not gonna tell you how many are really good. A lot of them. They're all
amazing them, all every single one is perfect, no. I think everyone
should call up Zander. I would say the David, but you know people just like
to get into real estate, ya know, and things can go sideways well you better
have a back-up plan.

And at the beginning of a deal we lay
out a few different road maps of how this can go you always wanted to use
plan A, but you better have a plan B or Plan C and I have a network of banks in
town. If we can't do a deal they're gonna do it or we're gonna get your deal
closed and if I don't end up doing going to do it, but you better have a
back-up plan in this market because there's a lot at stake.
There's earnest money at stake.

There's your reputation at stake, and you
know people talk and if word gets out that you can perform get deals done then
people are gonna work with you. And that's why people come to you when they want to buy or sell a house. Right. Yeah and right
now with the way it is Covid 19 in and the uncertainty there, and you know
I've heard some horror stories about both buyers and sellers pulling out the
last minute on the technicality and all that. So the team's got to be tight and
you want to know that you can trust your teammates and that they're
they're putting their client's needs as the priority.

We are definitely
seeing some more fallout on contracts. Either on option or after option, just
second, you know.. doubt, second thoughts, inspection issues, change in job, loss
their job, or just totally backing out with no explanation or explainable reason. We're seeing a little bit. Yeah and you know
that's Covid 19. When Covid 20 comes we could be
dealing with this for years right. We're gonna see iterations of this that
could change how we do business, how we invested, buy real estate for a long
period of time. This was a great learning lesson to adapt to.

I know I
spent way too much time in my office now that I'm working with home I was gone
all day and I never got to see my kids. One of the beauty of this is I get to
work from home and see my kids. Now, it's very hard to close the amount of volume
we do with seven, five, and two-year-old in the background, but you know we all
probably realized that we were not optimizing how we spend our time. So, there's silver linings with any kind of thing like this and when we
come out of this and try to get back to what is normal it's going to be
different and hopefully we'll take some lessons from that.

But you know we're
always happy to hop on the phone and answer any questions about lending
whether it's a year out, whether it's you need a pre
the letter tonight, those are the calls I enjoy taking that other lenders don't.
Because you wouldn't be calling if you didn't really need the answer to a

Right that's why we love working with you. Zander thank you for your time. I can't say enough about you know the positive
experience I've had with you with my clients as well you definitely know your
stuff your team knows their stuff and it's always it's always a good
experience. Thanks David, appreciate it. Really appreciate it, I'll let you get
back to it I know you're busy and we'll send it we'll put your information up
with with the interview. Thanks so much. Thanks guys, see ya..

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