In episode 16 of The Real Talk, Raquel Ramirez interviews Phil Stevenson, a mortgage broker from PS Mortgage Lending. They discuss the burning question of where mortgage rates are headed and explore the topic of loan eligibility. He also talks about his background in economics and his journey in the mortgage brokerage business.
Tune in to get valuable insights and dispel common myths about mortgages.
TIMESTAMPS
[00:01:31] Mortgage Rates and Market Fluctuations.
[00:03:48] Real Estate Market and Interest Rates.
[00:07:13] The Housing Market's Future.
[00:11:38] Calculating Someone's Eligibility.
[00:14:29] Pursuing a Career in Mortgages.
[00:18:07] Veterans Affairs (VA) Loans Misconceptions.
[00:24:08] Veterans Affairs (VA) Benefits.
[00:31:15] AI and its Potential.
[00:40:59] Interest and Tax Strategies.
This episode delves into the complexities of reverse mortgages and VA loans. Raquel Ramirez and Phil Stevenson emphasize that each case is unique, underscoring the necessity of conducting a comprehensive evaluation of an individual's financial situation. They stress that eligibility is not solely determined by income but also takes into account expenses and obligations, such as car loans, student loans, and credit card debt.
In addition, Raquel and Phil shed light on the rapid advancements in artificial intelligence (AI) and stress the significance of staying updated to avoid falling behind. They highlight the swift pace at which AI is progressing and emphasize that individuals must make an effort to keep up with it; otherwise, they risk being left behind.
Overall, the episode emphasizes the importance of carefully assessing one's financial situation and considering factors like outstanding debt, bankruptcy, and foreclosures when applying for a loan. It suggests that having a clear understanding of how lenders evaluate eligibility is crucial and advises against wasting time by embarking on a loan search without knowing if one meets the necessary criteria. Hence, this episode encourages listeners to seek professional advice before making any decisions regarding these loan programs.
QUOTES
SOCIAL MEDIA LINKS
Raquel Ramirez
Instagram: https://www.instagram.com/featured_properties_intl/
Facebook: https://www.facebook.com/featuredre
LinkedIn: https://www.linkedin.com/in/raquel-ramirez/
Phil Stevenson
LinkedIn: https://www.linkedin.com/in/phil-stevenson-crmp/
Facebook: https://www.facebook.com/phil.stevenson.12/
Instagram: https://www.instagram.com/mortgage_nerd_tm/
WEBSITES:
The Real Talk: https://www.therealtalkpodcast.net/
Featured Properties International: https://msha.ke/featuredre
Raquel Ramirez00:04 - 00:28
Welcome to The Real Talk. I'm Raquel Ramirez, your host and real estate professional here to bring you insightful conversations, expert advice, and powerful stories about what really goes on in life, love, divorce, and real estate. Are you ready? Let's get real. Hello, hello, and welcome to The Real Talk. How are you doing, Phil?
Phil Stevenson00:29 - 00:30
Good. How are you?
Raquel Ramirez00:30 - 01:22
I'm doing very well. Thank you for joining me on the Real Talk podcast. For those of you who don't know, I am speaking to Phil Stevenson today from P.S. Lending. He is a mortgage broker. And believe it or not, he's been in business since 2005. Actually, he's been doing mortgages since 2005. He has a degree in economics and he opened up his mortgage brokerage business in 2012. And interestingly enough, this is actually a really great detail about him. He came out in Forbes online magazine three times as a reverse mortgage expert. And I know that you hadn't mentioned it in the information you sent me, but you did coin yourself as a mortgage nerd, which I happen to love. And you do put out a lot of great content on social media, dispelling all sorts of myths and addressing really important topics. So on that note, once again, welcome to the show and let's get right to it.
Phil Stevenson01:23 - 01:23
Awesome.
Raquel Ramirez01:23 - 01:36
Thank you so much for having me. Of course. It's my pleasure. And I guess the very first thing we should talk about is where are mortgage rates headed? I know that's a burning question for everybody. That's the hot topic right now. So what can you tell us about mortgage rates?
Stevenson01:37 - 04:11
Yeah, and that's what everybody wants to talk about. You know, mortgage rates are tricky. A lot of people think that when the Fed says they're raising rates, that they're having an effect on mortgage rates. For the most part, that's not the case. A lot of times as the Fed raises the Fed fund rate, then mortgage rates will go up at the same time. But it's not always the case. Sometimes they go in opposite directions. Sometimes when the Fed announces a rate change the markets like it and mortgage rates go down or sometimes like today uh mortgage rates have kind of hit a peak last week between all the good jobs numbers and other things but then now this war unfortunately uh in israel is causing the markets to shift and people have a flight to safety meaning they're taking their money they're putting it into bonds mortgage bonds are what affect the mortgage rates. So rates have a good drop today. You know, I always say we kind of hope for bad news, not that bad news. But usually like we want unemployment or we want, you know, the COVID lockdowns, all that stuff helps bring mortgage rates down. Then the Fed at some point might come out and say, we're going to raise the lower the Fed rate. But that is not mortgage rates, that's home equity lines of credit, that's cars, that's credit cards, commercial mortgage loans like my commercial building. So all of those things go up and down as the Fed raises and lowers their benchmark rate. So what's going to happen? Well, we know today was good for rates. Rates started coming down. Really, we need the economy to break for mortgage rates to come down. So we need unemployment to start. Once unemployment starts going up or job loss starts being affected in a negative way, that's a positive thing for mortgage rates. Inflation coming down is something we also need to continue to see. It might be the beginning of next year or so that we really start to see mortgage rates come down. Yeah, this will geopolitics like the war, maybe that brings them down as well. But I would. I was at a conference last week and the economist for Fannie Mae came out and he was talking about it and others talked about it. The CEO of UWM, the largest lender in the country. Their feeling is some point next year, second quarter, third quarter, fourth quarter rates will be much lower, maybe back in the fives for sure in the sixes at some point. And that would be a good thing for the real estate market.
Raquel Ramirez04:11 - 05:43
Yeah, that absolutely would. I believe the rates are close to eight, if not right around eight. They're in the eights. They're in the eights right now. Oh, my gosh. That's another good point, which is a lot of people don't know that that rates fluctuate on a daily basis. It doesn't mean they go up a point every single day, but they do fluctuate. So you may get and you can correct me on that. You may get seven and a quarter today, tomorrow and maybe like a quarter of a point higher or even less than that or lower. But they do fluctuate on a daily basis. I actually can't even believe we had already broken 8%. That's crazy. Yeah, that's four times that we had seen a couple of years ago. And I think a lot of people have kind of stood on the sidelines for two reasons. Number one, some people have been priced out of the market, whereas before they could afford to buy a mortgage, I'm sorry, afford to buy a house. and finance that purchase because, you know, they were in the fours or fives. But once that interest rate goes up, that means that their payment also goes up, which means that their eligibility to or their ability rather to afford that payment goes down. And that's what people have a hard time, I think, understanding what their, quote unquote, their purchasing power is. I don't know if you want to touch on that at all and talk about because I think people have a lot of misconceptions as to how financing actually works. I typically talk to them about the process is in and of itself and why banks lend money and how they lend money. But the process gets a little tricky. And I think some people make or have these ideas and make these assumptions based on what their uncle told them, their front door neighbor, the guy next door who bought the house, and they don't really know how that works. And so they make a lot of mistakes going into the process.
Phil Stevenson05:45 - 07:28
Yeah, you definitely, I mean, as you know, the first step is to get pre-approved and then we go over those numbers and say, look, this is what your payment would look like if you went up to that price point. I always ask, I say, what payment do you feel comfortable with? Yes, good. When rates are in the twos and threes, I ask that, when rates now, some people, they've got a bunch of money. So they're like, I want to stay under 10,000. But I don't want to spend 10,000. You know, so others are like, I can't go over three. So you want to look at that first and not get your hopes up about certain things. Because a $4,000 payment now is probably, you know, 500,000 when it was eight or 900,000 couple years ago. Right. I'd say the biggest take home with rates, and there was a lot of people last year out there saying rates are going up, the market's going to crash. And I was one of the ones like, no, and there were others out there too, because rates don't affect values, it's supply and demand that affects values. The perfect example, real life example, is a house that that I bought for myself in Miami. I live in Key Largo now, and we have a house in Miami that we do Airbnb and short term rentals and use it ourselves. And we bought it December 21 of 2021. At the end of last year, looked at the value, bought it at 512. I think it was, the value was around 550. Right now, if I was to try to sell it, it'd be around 600. So everybody thinks, oh man, this market is slowed and values are going to come down. They have to come down. No, they don't have to come do anything. They have to do what the buyers and sellers want, which if there's more buyers than sellers, then the values are going to keep going up.
Raquel Ramirez07:29 - 07:54
That's right. That's exactly right. That's the basic premise of supply and demand. I think a lot of people forget that the interest rates were in double digits in years past. I mean, this idea that mortgage rates should always fluctuate between a two and a five percent is really kind of a farfetched idea, because that's really not we really haven't seen anything like that, I think, in decades. I don't even know if that's have rates ever been as low as with as what they were, say, in 2020 and 2021.
Phil Stevenson07:56 - 08:35
I don't think so. We may never see that again. Again, yeah. It may have been that covid anomaly. Right. Fours and fives is really healthy. And and yeah, that economist said, I've been saying we're going to definitely get into the fives and maybe dip into the fours sometimes. He said his range is four and a half to six. So averaging five and a quarter, this is when things settle down, when the economy crashes and then starts to, we have an expansion again, everything starts to normalize. We have several years of increasing stocks and increasing everything. Then we should settle in that range that'll fluctuate based on whatever's going on at the time.
Raquel Ramirez08:35 - 11:48
Yeah, yeah, I get it. I get it. And I think, yeah, I think we would definitely benefit from a reduction in the rates. And I do think that would probably be somewhere in the middle of next year. But what I tell people is you have to remember if we do have Let's say a significant dip, right? For sake of conversation, let's say we go down two to three points. We go from eight to a five, which is fantastic. That's a great number. It's a big savings for a lot of people. Everyone who's been on the sidelines up until this point is going to jump back into the market headfirst. And with inventory as tight as it is already, as it is today, I don't foresee there being any significant increase or let me say a significant, what's the word I'm looking for? I don't think it's going to necessarily help buyers in the sense that there's going to be that much more inventory going around. So just because rates decrease doesn't mean that there's going to be more opportunity for you out in the market. What I think is going to happen is that even though some sellers are going to be motivated to sell their property, I think inventory is still going to be low. Demand is still going to outpace supply and values are still going to go up. So when people ask me, for example, I had a recent episode where I talked about, should somebody buy a property today? Well, the answer is, it depends. It depends on a lot of factors, but if you're looking to get into the market because you need to, you know, buy a place for your family, you got a divorce and you need to find a new home, you know, or if you're just like, I don't know, shopping around and hoping for a good deal, that may not be ideal for you if you're looking, if you're shopping for rates, but you should get in now. Don't wait, because some people have waited thinking that the rate would drop from a five back to a three, and then they eventually got priced out of the market. Or they were in a five and they thought, nevermind, that's gonna go back to a four and a half, and then it went up to a five and a half, and then a six, and then a six and a half, and now we're in the eights. So if you think that you're going to wait two or three months for something to happen, nobody has a crystal ball here, that's the truth. And for as much as we can predict based on all of these factors and these details and market index and all that kind of thing, We really don't know for sure. So if you if you need to buy a property, you're interested in buying a property, now would be a good time. And you should speak to somebody like you, who is a an economist, be a mortgage nerd, which I love to say, because you do know a lot about mortgages. And anytime I refer to you, I always say that if there's anybody that I trust to tell me exactly how the market is behaving or what to expect in lending, it is you. So I'm very happy with the service you've given all my clients in the past. And and three is to check really your finances. This is key. I can't stress it enough. I talk to people, they say, yeah, I don't, I don't think it's going to be a problem. I just want to start looking for property and I make enough money. I make enough money. I shouldn't have a problem getting financing. Well, you're not a lender. So you have no idea how they're going to look at your finances and what about your finances is going to make sense or not. So let's touch on that briefly. And tell us a little bit about how you calculate someone's eligibility, because there is this idea that just because you make a lot of money, that you should have absolutely no problem qualifying for a million dollars.
Phil Stevenson11:48 - 13:37
Well, let me give you an example of how that could be a fallacy, because someone might think I make X amount of money, but it also depends on what type of job they're in. If you've been a W-2 employee for years, you're fine. But if you have A case I had recently, this person had been in the US for two years. They started with a financial company and they were making a guaranteed draw. So their money was, you know, they had a base salary, but it wasn't really a salary because it was kind of like their guarantee of money. If they didn't make any commission, they'd guarantee that money. If they made more than that, they'd make more than that. He did that for two years and then all of a sudden changed to full commission. as they called it. And but now we had to kind of fight. We had to send this to three different lenders to finally get one to see our point of view. And his employer kept calling it a salary, not a guaranteed draw, when those contract had a guaranteed draw wording in it. So that type of stuff is very difficult. This person came to me. already under contract, you know, so it's like, we could have fixed all these things before you went looking for a property. You know, there's different ways of doing it. And so it was very, very messy process. You know, in the end, we pulled through and we got it done. But yeah, you don't want to come up against that. And then you think, Oh, but But it's fine, I only had this and so I get it, but the mortgage guidelines look at it the other way. So that's a good example as to why you need to, if you're straight W-2, you still need to because you don't want to start looking for something and then you don't qualify for it and you've wasted a bunch of time.
Raquel Ramirez13:37 - 14:02
That's right. That's right. And it's not just about your income. It's also about your expenses. What are you obligated to pay, say, on a monthly basis? What kind of debts do you have? Assuming cars, student loans are a big one. Outstanding debt with credit cards. What if you filed bankruptcy? Bankruptcy, foreclosures, things like that. All those things affect your eligibility for a loan. Am I right?
Phil Stevenson14:03 - 14:18
Yes, yes, there's all all the guidelines that we don't want to get too deep into here. But yeah, we would definitely want to look at that and see because every one thing I love about what I do is every case is different. So it's not boring in that sense. Yeah, we're always on our toes.
Raquel Ramirez14:18 - 15:04
So that is true. That is true. I'm sure I'm sure you are on your toes, especially in this market. Now, You said something that triggered something in my memory, actually. You said that you love what you do. And if I remember correctly, you initially got into mortgages. And correct me if I'm wrong. It's been a very long time. Actually, I think I've known you probably upwards of 10 years now. I think you said you got into mortgages because your grandparents were looking to purchase a home and they were being offered a reverse mortgage. And something about that process didn't sit well with you or you didn't understand the process too well. So you looked into it enough to fall in love with the business and pursue a career in mortgages. Am I right? Almost, almost. Okay. I was close. I got into that.
Phil Stevenson15:04 - 17:27
Yeah, I got into business in 2005. I was in finishing college. I actually have a degree in international relations and then also economics and geography. And so I was going to get into the State Department and all this stuff. And then I was turned off by a long story I'm not going to get into. And then I decided, well, let me go into business for myself. Real estate was booming. Economics, mortgages, good fit, right? Of course, market crashes a couple of years later. In 2008, 2006, I learned about the reverse mortgage a little bit. I came to my grandparents and said, hey, This is something it's not all the negative stuff you hear out there. No, no, no, we don't want to do that. In 2008, they ended up coming back to me saying, OK, let's do this. I really dug in to understand because I was their heir. My mom had already passed away. And so my aunt, uncle and I were looking at this, you know, to make sure. It is what it is. And it really was all the, it's not all the negative stuff you hear. If there's one negative thing about it, closing costs are higher than a regular mortgage. But aside from that, you still inherit the property, you don't, you know, the kids inherit the property, all that stuff. So of course, the market was crashing was terrible in 2008. And instead of getting out of the business and getting a job at Starbucks or something like many people did, I found a company that was learning the reverse mortgage as well. They were kind of starting, but doing a lot of Spanish radio marketing and Spanish TV, Radio Mambi and stuff like that. I just speak fluent Spanish. And that's where I get the Felipe from there. Oh, yes. Bill Stevenson. Okay. Come on, Phil. Fail, fail. No, Felipe, but in English they say, ah, bueno, te llamo Felipe. So. So we started to thrive while others were getting out of the business. By 2011, I focused solely on reverse mortgages. And that went all the way through to 2017. And 2015 to 2017, my company was number one in Florida in production. No one closed more reverse mortgages than us. I had a team under me at that point. And You know, actually, this commercial building I own now that where my office is, I bought that in 2015 because of how much we were booming. And so, you know, I've closed over a thousand since and but now it's actually a small part of my business because we do all mortgages again.
Raquel Ramirez17:27 - 18:26
Right, right, right, right. OK, so let's talk about and I want to point out the obvious, which is that you served in the military. So thank you very much for your service. I'm a big patriot and I love. Yes. Yes. I love our vets. And so I thank you for your service. And so. between reverse mortgages and VA loans. I know that you do both of those and you specialize in those. So we talked a little bit about the reverse mortgages and I think I may want to get back into that, but let's talk a little bit also about VA loans because VA loans, you know, they're not as common because they're only people who served in the military actively or have retired are the only ones eligible for that. I believe spouses are, you know, for surviving spouses, rather, for ex-military or military, are also eligible. Let's talk about that a little bit, because I know it's a wonderful benefit, one of the very few, I think, because I think you guys deserve a lot more than that. It's a wonderful benefit, and you can finance up to 100% of your purchase.
Phil Stevenson18:29 - 19:35
Yeah, yeah, there's so many misconceptions. I actually just did a video series of 10 VA myths. And so they've been going up one by one every couple days. And yeah, so there's a lot of myths and misconceptions behind the VA. Probably one of the biggest that we hate the most in the industry is when you when you as a realtor, you have a buyer and try to look for property, and they say no VA on the listing. And you ask them why? And they're like, Oh, no, no, no VA takes too long. That's not true. It's the same as every other one. You know, oh, they look at the property to, you know, harshly and well, no, it's health and safety. It's got to have health and safety. If there's one area there where I see is different, it's that they do a termite inspection. Yes. So if the seller knows they have termites, you know, they need to list it anyway and tell the buyers. But yeah, and there's ways around, you know, getting treatment beforehand and things like that to get it closed. So. I mean, aside from that, there's just tons of benefits for the veterans.
Raquel Ramirez19:35 - 20:39
It seems to be very simple. I actually Carlos, my fiance, is a military vet. He served in the Navy. And so we purchased our home through a VA loan. And so I got to learn very hands on how that process works. And I was very pleasantly surprised to learn two things. Number one, it's incredibly efficient. And number two, it's very simple. It's actually one of the easiest, and correct me if I'm wrong, it's one of the easiest loans to obtain. We were able to finance 100%. He was eligible for that. And We did have to do a termite inspection. And in fact, we did find in the property we were purchasing that there were termites, not a lot. I think there were just certain areas that had a termite infestation. And so we were able to do a spot treatment and then go back out for a re-inspection and we cleared it and that was fine. And a termite inspection costs you like $200, $250. So it's not something that breaks the bank. Now, is there a reason or maybe I'm remembering incorrectly, that the borrower is not allowed to pay for the termite inspection. Is that a criteria or is that a guideline?
Phil Stevenson20:42 - 21:43
Not so much the inspection, but the treatment, technically, the seller has to cover that, yeah. The termite inspection, there might be something, I haven't done any refinances in a couple years now. There's something to that with the closing costs on the refi. But actually, speaking of the refi, the VA has the only refinance that is the most common sense. They basically, we don't look at income, We don't look at your credit scores or your debts. I'm sorry, we do look at the scores, but not your debts. And the thinking is if you're going from a high payment to a lower payment and you haven't missed any payments on the higher one. Why wouldn't you qualify? Yeah. It's like, oh, no, we're going to leave you on this higher payment that you can't afford instead of putting in a lower payment that maybe you still can't afford, but you can afford it more, you know. I wish conventional had the same thinking, but no, it's only for VA that they do that, which is really cool. No appraisal either. So your value could have dropped and you go upside down and you can refinance and lower your rate.
Raquel Ramirez21:43 - 22:41
That's true. That's true. I have heard that. I have heard that. So, yeah, VA loans, I think are great. I don't understand why people shy away from them. There is, of course, just like any other loan program, there is an appraisal involved on the purchase side, not the refinance, but the purchase side. You still need to, but that's regardless if you're financing through the VA or you're financing through Fannie Mae or you're financing, it doesn't matter what you're financing, you still need to obtain an appraisal because the bank will only lend you a percentage of the value of the property that you're buying. Whatever that value may be, it could be $5, it could be $5 million. The bank's going to lend you 70%, 85%, 97, 100, whatever of the value and not the purchase price. So an appraisal comes into play regardless. And I think people just don't understand that. I try to take my time to explain that to buyers. What else can you tell us about the VA? Anything in particular maybe going on now? And has anything changed with, you know, how the rates have gone up? Has it affected the VA process at all?
Phil Stevenson22:44 - 24:05
So rates are typically lower on the VA than conventional and there's no mortgage insurance. But something you asked me about recently, I'll say the beginning of 2020, they removed your limitation of the amount you can borrow at 100% financing, meaning zero down. Oh, that's right. So whatever the loan limit is for the year, which has gone from 417, layered all the way up to 726, now they're announcing next year's is 750. It used to be that if you borrowed anything higher than that loan limit, you would have to put in 25% down on that extra. So 750 is a loan limit. If you bought at 850, you'd have to put 25,000 down because it's 25% of that extra 100. Well, the beginning of 2020, it didn't matter. If you buy a $1 million property, a $10 million property, as long as you have your entitlement guarantee, then it's zero down, which is part of why I moved to the Keys. It was like, yeah, we were in 2020, we were looking at buying a second home down there. And the rates were so low, I was like, you know, tell my wife. You know, zero down, we keep the house in Miami and and then, you know, and all that stuff. So. So, yeah, it was a perfect, perfect move for us. And of course, like everything, it's appreciated since then.
Raquel Ramirez24:06 - 24:28
Yeah. Here's something I don't know, actually. If you use your VA benefit, let's say as a first-time homebuyer, you're going to buy your first home. You finance 100 percent, zero down. Fantastic. If you purchase the second home, are you still eligible for 100 percent financing or does the eligibility or the benefit change in any way? Is it a one-time use?
Phil Stevenson24:28 - 25:58
Yes and no. It's not a one-time use, but it's not Definitely a two time use. For me, example, I bought over the limit. Therefore, I used all of my entitlement. So let's say the limit is now 750. If you buy something for 300 at zero down and then you still have 450 left of entitlement. So if then you typically this is made for these rules are for active duty people. So now you need to change to a new duty station. You can keep that 300 in one place, go buy something at 450 and do zero down. If you're buying that other place at higher than 450, now that same old rule of the 25% over, you do have to put 25% for whatever amount is over your entitlement when you're working with two. What I tell everyone is I just need to see your certificate of eligibility. It tells me what I need to know. And then like anything, we pre-approve and we say, this is what works for you. This is what doesn't. Something to go back on that people don't know is that the refinance, the interest rate reduction refinance loan, IRRL, is the one that you do without appraisal, without income. Even if you move out of that property, you bought that 300, you moved out, you bought the other 450, you got both a zero down, you can refinance both of them. Even though the other one's an investment now, they do allow you to do that.
Raquel Ramirez25:58 - 26:02
Oh, that's fantastic. Yeah, so this is for active military only.
Phil Stevenson26:02 - 26:17
No, no, this for it just made some of those rules on allowing them to move were made more for active duty in mind because they're relocating. Yeah, but but it could be for for anyone that's a veteran that qualifies for it.
Raquel Ramirez26:17 - 26:23
That's great. And if I remember correctly, the document that you need to submit to a lender in order to determine eligibility is your DD 214.
Phil Stevenson26:25 - 26:57
Sometimes we need that, sometimes we can just go online and pull up their info or they can get us their COE, Certificate of Eligibility. If we can't find it, usually the older veterans, we start getting into like the Vietnam War era and stuff. Then we have to get their DD-214 and send it in and wait. So the younger ones, I don't know if I fall into younger or not, but somewhere in the middle. I'm an Iraq, Afghanistan type of person. But but yeah, we should all be under the database and electronically.
Raquel Ramirez26:57 - 27:06
So yeah, we've we've moved moved up in the world. Yeah. Technology. It's a thing. Tell us where you served, actually. I think you were in the army, right?
Phil Stevenson27:07 - 27:29
Yeah, I was in the Army Reserve for eight years. I wanted to do military police because I thought I wanted to get into criminal justice and I'm colorblind. So are you really? Yeah. So the Army said, yeah, the Army said I could only do administrative work. So I said, what gives you the most money to go to school? They said postal, postal, like working the mail.
Raquel Ramirez27:29 - 27:29
I said, yeah.
Phil Stevenson27:30 - 27:57
So little did I know what happens when war breaks out and the active duty bases are deployed. Active duty bases have civilian post office on base. So they call up the reservists to go out there. My unit was in Bosnia and Kosovo before I got there. And then when I got there, we were the first ones into Afghanistan and Iraq, you know, building those up. And after that, I was done. I was like, I'm I don't want to have my kids be born while I'm out there, which I saw happen to others.
Raquel Ramirez27:57 - 27:57
Oh, sure.
Phil Stevenson27:59 - 28:02
And so I did my eight years, I did my time.
Raquel Ramirez28:02 - 28:58
Wow, that's interesting. That's interesting. Thank you again for your service. I love the military. Okay, so yeah, that's fantastic. I think more people need to be informed about their VA benefits. I don't know that everybody knows that. Now tell me about the spousal benefits, because I do remember I sold a property. The buyer was a widow, a military widow, and I was not representing her, so I didn't know much about her finances or anything like that. I only had her VA approval certificate and all that kind of stuff, but I didn't know really how the criteria served her well. And I think it was that she, I guess, some way, somehow inherited his benefits as a widow of and he was active duty, actually. I think he died in and I don't know. I don't know where he died. I'm not going to get into that. But tell me a little bit then about what benefits, if any, the spouses are entitled to.
Phil Stevenson28:58 - 30:16
Yeah. So you kind of hit it on there. I've had I've had widowed spouses reach out before. And if For example, now, if I'm married and I pass away, my widow's not going to get anything because I'm just a civilian. But even if you were driving your car on a base and you're active duty and you die, then it wouldn't qualify. You have to actually have been on order somewhere. I'm being a little bit vague because I know for a fact if you're in combat. But I think there's some wording in there where even if it's not like a combat zone, but you're on orders for deployment or something like that. So it would have to be a case where you were on duty. That's how she gets those benefits or he gets those benefits. The other thing, though, is when a veteran or service member gets 100% permanent and total disability, then certain benefits kick in for the spouse. I know for sure the spouse gets health care and other things and the payment for life if the veteran passes away, but I'm not 100% on if it's 100% if they get the VA mortgage benefit or not. That's something good for me to look into.
Raquel Ramirez30:17 - 30:21
But they do get a lot with that. Interesting. Interesting.
Phil Stevenson30:21 - 30:39
There's so much there. So I learned something recently that I'm going to do at a conference. Chat GPT reads PDF files. So I'm going to take I'm going to take the whole VA guideline and I'm going to throw it in there. And right now I would have been like chat GPT. I've got the guidelines for you.
Raquel Ramirez30:39 - 30:54
Oh my gosh, that is crazy. Actually, tell me then a little bit about how artificial intelligence helps the finance industry. I know how it helps us in real estate, but what have you seen has been helpful to you when it comes to AI?
Phil Stevenson30:55 - 31:55
I personally haven't seen much except that I was at a conference and one segment they had was on AI and that one was the one that was like, whoa, you could put other guidelines in there too, but. guidelines for conventional FHA are constantly changing, VA doesn't really change. So at least that'll be in there for a while. But there's there's other things like, you know, creating flyers, which probably, you know, from the real estate side, you have the you do chat GPT-4, which is the one you pay for. And then you have the plugins like the PDF reader I mentioned, but also Canva. So you can put your stuff in there and say, make me a flyer for this and this and this. And all of a sudden you have all this stuff done for you. So it's cool. I'm now going to dig in more because AI is moving so quickly. It's so fast. If you're not trying to stay up to date with it, well, we'll not be able to, but if you're not at least trying, then you're just going to be left behind.
Raquel Ramirez31:55 - 33:08
Yeah, I listened into a presentation earlier today from a mediator who's also an arbitrator, and he was talking about how AI was being used to figure out some case law. The problem is that, from what I've told, is that AI does suffer through what they call hallucinations, where they come up with stuff that doesn't exist. So especially in the legal industry, they have to be very careful because it'll just spit out some made up case law and it just doesn't exist. So you can imagine going to court and trying to present something and they're not being facts. I mean, they're made up cases and that's just a little scary, to be honest with you. I don't know. I think there's a lot of tweaking that needs to be done, but this has certainly taken off and quickly. So we need to keep our eye on it. Anything else you want to talk about? I know that because we briefed over it, but about the reverse mortgages, anything that you want that, let's say anything you want, you know, the elderly to know is there an age requirement, for instance, you know, a down payment requirement, how does that work?
Phil Stevenson33:09 - 34:04
Sure, so typically reverse mortgages are for people 62 and over. That's the FHA reverse mortgage, but there are private or proprietary reverse mortgages that came out over the years that have different Pros and cons to FHA's reverse. One of those pros, I guess you could say, is you can go down to 55 years old. But the con there is the loan-to-value is really low, so I don't have any. Some people have done them. So yeah, you want to be of that demographic, typically baby boomers now. And what you do, the way I explain it, it's a mortgage like any other mortgage. It's got an interest rate. It's a loan from a lender. It could be insured or regulated by FHA. But all you're doing is instead of taking the money out of your pocket every month, the way you or I on our mortgages, we take out that money, we send the payment in. Of course, it's electronic. It's the proverbial.
Raquel Ramirez34:04 - 34:06
Is anybody still mailing their checks? Yeah.
Phil Stevenson34:07 - 35:53
I always give this example, especially with older people that do know the coupon and everything. You get a statement in the mail every month, but there's no coupon on it. The way now you'd have a little coupon with the payment amount, which we don't get in the mail. We look it up now. But they'll get one in the mail, and it's just going to say, your interest is deferred. So if your interest for that month is $1,000, now you owe $1,000 more than you did last month. The next month you owe $1,000 more than that. So instead of it coming out of your cashflow, out of your pocket, you're able to use that money to live and you're just deferring that interest for a later date. But yet people see that and they think, oh my gosh, you're losing all your equity. Are you losing all your equity? Are you gaining cashflow? Right. You're using your equity. Exactly. You're using your money that you put into leveraging your property as opposed to selling it. So I go, I want to 100 percent of what I can get. No, you're probably getting around 50 percent of it because there's got to be enough equity there for those payments you're not making. True. That's a good point. We don't want it to be like after the crash of 2008, where people got 70, 80 percent of their value values crashed and now they were all upside down. Yeah, yeah. There's a lot of other protections I can get into that since then, but. like widows, widows at that time when values went upside down, they were left with an upside down house, had to sell and or be left with nothing. And they were I can't tell you how terrible it was getting those calls and having to explain to them. And and they just choice. Now they're protected so they can live there the rest of their lives. If you're a widow, even if you were under 62 and you did it. So there's a lot of changes that are for the positive with reverse that if someone heard something negative, it's probably how the program used to be to work. Right.
Raquel Ramirez35:55 - 39:02
Interesting. Yeah, interesting. I know that some families have issues with that because they think that at the end of the day, let's say their loved one lives another 10, 15, 20 years, that there might not be something in there in the property to liquidate as a gain to them in the future. That property is not anybody else's, but the person who owns it. And that's a little bit of a peeve of mine. I have a soft spot for parents and elderly. As children, a lot of times we suck the life out of our parents, let's be honest. You know, I see it all the time as I do, not only do I do divorce, but I do a lot of estate sales. And estate sales can be just as horrible as divorces because you have people who are tearing themselves apart. And in this case, it's not a husband and a wife, it's cousins, siblings, you know, an aunt, and it's just random people who are in line to take something that didn't belong to them in the first place. And I know that you lost your mom. I lost my mom too. I would give anything and everything that I don't have to have my mom and not to have had inherited her estate. You know what I mean? Like that's money she worked for. That's a property she worked for. I wish she would have been able to live it out, you know, much longer than she did. But. you know, people tear themselves apart, you know, for 20, 30, 50,000, 200,000, $500,000 that they didn't stand, you know, to earn anyway, you know what I mean? And so I think that's the biggest peeve with families in making a recommendation to their loved ones not to go the reverse mortgage route because they think that there's gonna be no equity in there for later use. And that's really selfish. I think that's a selfish way to think about it. Elderly people live on fixed incomes unless, you know, they work well into their 80s. There are some people who do that, but most elderly people, you know, have fixed incomes, very little incomes. And so this makes a lot of sense to defer what is a very large chunk of money, right, in terms of interest, you know, to add it to the back end so that if and when they have to sell, let's say, and move into an ALF or move in with their families, you know, they can just pay that off. So as opposed to, correct me if I'm wrong, As opposed to having a normal mortgage where you've kind of chipped away little by little, let's say you bought a $500,000 house, you had a $450,000 mortgage over the course of I don't know how many years, your balance now is 350, right? Because you've paid $100,000 over, I don't know, 10, 20 years, whatever, and you sell the property and you pay off $350,000, it's gone down. When you have a reverse mortgage, let's say you buy something like that, you buy, let's say you have a $300,000 loan, As opposed to that balance going down, it may go up. Is that correct? But ideally, the value of that property will also go up. So instead of making $100,000, you might make $50,000, but you have paid off. Your payoff will be higher, but you would have paid off your mortgage and you wouldn't have had to take money from where you probably don't have to make those payments every month. Right. I don't know if that sounded more convoluted than it needed to be.
Phil Stevenson39:04 - 39:33
I'm trying to make sense of it. That's exactly what it is. You know, values have been going up 10% in South Florida, 10% for the last five years, a year. But if your interest was 3, 5, 7% throughout that time, you're still have more equity now than when you did the reverse mortgage. That's right. That wasn't the case before the crash to after the crash, but that's also an anomaly in our economy. We may never see values crash like that again. We may see values dip, but not crash like that again.
Raquel Ramirez39:33 - 39:42
Yeah, I agree with you. I agree with you on that. Now, on the flip side, they are still making a payment to the mortgage, right? They're still paying principal.
Phil Stevenson39:42 - 39:43
No, they don't have to.
Raquel Ramirez39:43 - 39:46
They don't have to. But if they want to, they can.
Phil Stevenson39:46 - 40:59
I say it's flexible payments because you can make payments to interest. You can make payments to principal. It's a line of credit. It can be a line of credit. I've even had some people where we've shown strategies. If you take the money and you do make the payment and you pay interest in mortgage insurance, consult your tax professional, but I was told that it's a tax deduction. I can't give you tax advice. So, but what they're doing is they're putting that money into their line of credit, including the interest. Here's where it gets like crazy. But so if they paid down $30,000 in interest in December, And then in January, I'm just making a line to make it easier because you paid it down in one year and the next year you're borrowing money again from your line of credit. The IRS doesn't come and say, did you borrow from the line of credit where you paid your interest? No. paid your interest, and then you pulled money out. And then at the end of that year, you can pay your interest again. And so people have done strategies like that, that I'll tell you 99% of people in the reverse mortgage world, not just the mortgage world, but the reverse mortgage world, which is even smaller, don't understand that type of maneuvering.
Raquel Ramirez40:59 - 41:50
Interesting. Very interesting. Very interesting, indeed. Well, thank you so much for sharing that. I don't know if you have anything else that you wanted to highlight when it comes to reverse mortgages or VA loans. But I think that pretty much covers, you know, I think both of those topics, at least in a broad sense, so that people understand that there's more to these loan programs than meets the eye. Don't always believe what you hear outside. This is exactly what this podcast is about. These are the things that you don't know you don't know. And before you get advice from your neighbor, your coworker, your friends, your aunt, whomever, reach out to a professional who does this for a living and who has the reputation to back it up to answer the questions that you have. So with that said, I thank you so much for joining me today and I look forward to having you in the future. Should anything change, do let me know and let's hope that those rates come down in the future.
Phil Stevenson41:50 - 41:51
Thank you so much.
Raquel Ramirez41:53 - 42:11
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