In episode 20 of The Real Talk, Raquel Ramirez interviews Phil Logue, a mortgage loan officer with Equity Express Mortgage. Phil shares his extensive experience in the mortgage industry, having started in 1988 and even owning his own mortgage brokerage business. He discusses his journey as an investor, landlord, and homeowner, offering valuable insights into the lending world.
Tune in to this insightful conversation about mortgages and lending.
TIMESTAMPS
[00:01:36] Experience in Lending.
[00:04:37] Importance of Pre-qualification Process.
[00:08:09] Debt-to-Income and Loan Qualifications.
[00:12:39] Self-Employed Loan Options.
[00:14:10] Different Loan Programs Available.
[00:17:50] Condo Financing Challenges.
[00:22:10] Underwriters and Loan Process.
[00:28:01] Strange Things in Loan Applications.
[00:31:04] Lateral Career Moves and Loan Process.
[00:34:19] Interest Rates and Homebuyers.
[00:38:14] Will We Get a Recession?
[00:41:46] Property Values and Market Trends.
In this episode, Raquel Ramirez is joined by, Phil Logue, a mortgage loan officer with extensive experience in the industry since 1988. He has worked as a loan officer, owned his own mortgage brokerage business, and has been involved in real estate investments as a landlord and homeowner. Phil provides detailed information about what to expect, available options, and how the mortgage industry works. He also emphasizes the importance of understanding the lending process and making informed decisions.
In addition, one of the key topics discussed is the buying power. Raquel and Phil highlight the significance of understanding one's purchasing power before searching for properties. Many people rush through the home-buying process without fully comprehending their financial capabilities, and they also stress the need to avoid wasting time and effort on unaffordable properties by knowing one's purchasing power. Another important topic covered is interest rates. Phil explains that interest rates can impact purchasing power, as higher rates can decrease the loan amount one qualifies for based on their credit score.
Overall, this episode provides valuable insights into the mortgage industry, emphasizing the importance of understanding buying power and considering interest rates when making real estate decisions.
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 Logue
LinkedIn: https://www.linkedin.com/in/philip-logue-75146263/
WEBSITES:
The Real Talk: https://www.therealtalkpodcast.net/
Featured Properties International: https://msha.ke/featuredre
Raquel Ramirez00:04 - 00:27
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. Welcome to The Real Talk. How are you doing today?
Phil Logue00:29 - 00:31
I'm doing very well. How are you?
Raquel Ramirez00:31 - 00:55
I'm doing well. Thank you for asking. I'm very happy to have you on the show. Finally, I know this has been long coming for the audience today. I am speaking with Phil Logue. He is a mortgage loan officer with Equity Express Mortgage. And believe it or not, this young, handsome man right here has been in the mortgage industry since nineteen eighty eight. Not to give your age away. You must have started when you were what, six or seven years old, Phil?
Phil Logue00:55 - 00:56
Yeah, it was a kid.
Raquel Ramirez00:59 - 01:36
I've known Phil for a number of years. Not only has he been a resource for me, but he's taught me a lot about the lending industry. And that's what we're gonna talk about today. Phil, I know you're not only a mortgage loan officer, you've owned your own mortgage brokerage business. You know mortgages and lending in and out. And you've also actually been on the opposite side of that because you've been an investor yourself. You've served as a landlord, you're your own homeowner. So let's get into that. Tell us a little bit about you, who you are and how you got into the lending world and the kind of experience you bring with you.
Phil Logue01:36 - 01:59
So I got licensed as a mortgage broker, now we're called mortgage loan officers in 1988. Also that same year, I bought my first house, a three bedroom, two bath house. And I rented out two rooms to good friends of mine. And then I kind of became a mortgage broker, a real estate investor, owner and a landlord all at the same time.
Raquel Ramirez01:59 - 02:03
So you actually invented the concept of house hacking in 1988.
Phil Logue02:03 - 02:38
Yeah, I was doing it back before we knew what it was. So. So, yeah. So. And it just kind of took off from there. I worked for a couple mortgage lenders, some savings and loans back when they were around as a loan officer. I opened up my own shop in 1992 with a friend of mine, and I had that for like 29 years. And so I now have my license hanging with a friend of mine, Tara, over at Equity Express Mortgage. So I'm still in my day job.
Raquel Ramirez02:38 - 02:40
I'm still mortgage lending.
Phil Logue02:40 - 02:47
I can't let go of it. I still like to do it. It's a lot of fun, especially when you have a closing and everyone's happy.
Raquel Ramirez02:47 - 02:47
That's right.
Phil Logue02:48 - 03:24
Yeah, you know, they got the American dream. So it's like a dream come true. But yeah, I'm a real estate investor. My brother and I started buying properties and becoming landlords. So it just kind of blended together. As well, I've done some private lending on my own with my own money. I'm in the mortgage note world, too. So a lot of different things. I've done rehabs on houses. I've bought a lot of property. I've sold a lot of property. So I've kind of been on all sides of the real estate world, which I think helps.
Raquel Ramirez03:25 - 03:27
A hundred percent, yes.
Phil Logue03:27 - 03:45
A lot of times I've been there, I've been through it, so I can help my borrowers kind of walk that path, whether they're investor or primary residence, multifamily, I've had those too. So I kind of have a lot of experience in a lot of different parts of the real estate world.
Raquel Ramirez03:46 - 04:02
Yeah, you can certainly see the transaction from different angles, which is kind of it adds a certain relatability to the process. And I think people tend to feel better when they can relate to the person that's helping them through the process and not just someone that says do as I say and not as I do sort of a thing, right?
Phil Logue04:03 - 05:50
Exactly. So, you know, I try to help them through the whole process. You know, working with a realtor like you helps a lot. You know what you're doing. Part of it is having someone like a realtor where you recognize they need to get pre-qualified. That's a big piece of the puzzle nowadays. And a lot of people want to skip that. And then they go house hunting and they're like, OK, give me a proof. Well, you know, it doesn't always work so fast. That's right. Yeah, so one thing. pre-qualification, I would like to talk about that a little bit right now. It's important that you start the pre-qualification process kind of even before your house money because there are a lot of obstacles in the way. Lending is not easy. And, you know, after the real estate crash, a lot of rules and regulations came in. So as far as the qualification part of it, you know, if you're a salaried person, You work for a big company or a small company, it's not so hard. You make a salary, we need your pay stubs and your W-2s for income. Now, if you are self-employed, it gets a little trickier because then you need tax returns, and normally they want two years of tax returns. If you're salaried by your commission or you get a bonus or overtime, that also gets a little trickier too. So we can solve all these things, but the more time we have up front, the better. As well, they look at your credit. Sometimes you have digs on your credit, but we can help, you know, get the scores up. There's things we can do to help with the credit scores as well. Or there may be erroneous credit on there and then we can get that removed.
Raquel Ramirez05:50 - 05:53
You know, like you have the same name as somebody else.
Phil Logue05:53 - 05:57
Like that's not me or medical bill that we can get cleared off. So.
Raquel Ramirez05:57 - 05:59
That actually happens a lot. Yeah. Yeah.
Phil Logue05:59 - 06:02
So there's a lot of things we can do up front.
Raquel Ramirez06:02 - 06:06
To improve your position. Yeah. In order to be able to retain a loan. Right.
Phil Logue06:06 - 06:28
And then the third component is the assets. They want to see, you know, where's the money coming from? If it's cash deposits, you know, in today's world, that's not allowed. You know, with the money laundering rules, they are not, you know, real estate, you're not allowed to use cash. So if you deposit $10,000 in your account, you know, that's going to be a problem.
Raquel Ramirez06:28 - 06:30
Now, the seasoned money has been in there for over 90 days.
Phil Logue06:32 - 06:40
that's usually not a problem. So again, if we can look at things ahead of time, we can kind of avoid the landmines that could be out there.
Raquel Ramirez06:40 - 08:07
That's right. And set the client up for success. One of the things that I do, and I think you know this, is I usually provide my buyers with a rundown of how everything is going to work, right? And I always, always, always encourage, in fact, I don't even work with people who refuse to get pre-qualified before the process because It's like you said, you know, you have to review a certain amount of information to determine your eligibility. And just because you make a million dollars a year doesn't necessarily mean that you qualify for a million dollar loan because your expenses may be $950,000, meaning that then you really only have $50,000 to use towards, say, a mortgage, right? So those things are the kind of misconceptions, let's say, that people have that because they make an X amount of money, or they have certain position in a company, that they should automatically qualify for, I don't know, three, four, five, whatever number they have in their mind. So I run through that usually at the very, very beginning and kind of help them set those expectations early on so that when they work with someone like you, they understand that they're going to have to provide certain amount of documentation, that they're going to look at their income, their assets, and also their expenses, their credits, and that you're going to go through a process of dotting your I's and crossing your T's to determine really how much money there is after all of their, let's say, their other debt obligations and things of that nature to determine what amount they actually can afford in terms of a loan.
Phil Logue08:09 - 08:30
Yes, so that's super important because, you know, sometimes you want to live in a certain neighborhood where the price range is that much. So your debt to income becomes very important. So the debt to income would include the housing expense, but also other debt you have. Car payment, two car payments, loan, credit card debt.
Raquel Ramirez08:30 - 08:37
So you can have a borrower that makes the same amount. You got two borrowers that make the same amount of money. You know, I make $50,000, you make $50,000, but this guy's got
Phil Logue08:38 - 09:06
a car payment and a boat loan and a student loan. This guy doesn't have any personal debt. He's paid everything off. Well, guess what? The guy with no debt can buy a bigger house. So, you know, so things like that all have to be worked out ahead of time. And then maybe you can pay some debt down or maneuver debt, you know, some that's high expense. You'll find something that's more lower rate, lower payment, gives you bigger buying power. So that's another component as well that we can try to work on.
Raquel Ramirez09:07 - 09:27
That's right. I get a lot of pushback, believe it or not, from people. And they're like, no, no, I'm pretty sure I can qualify for X loan. And what I typically say is, well, you'd be surprised. You'd be surprised given the interest rates, because the interest rates could put a little bit of a squeeze also on your purchasing power, what you might qualify as an interest rate. You might qualify for the best interest available, but you might not depending on your credit score. Am I right?
Phil Logue09:28 - 09:56
Yes, credit score is a big component. You have, you, you are issued three credit scores, three trade bureaus. Each one gives you a score. In the lending world, we take the middle score. A lot of times people will look at one score, maybe online to get a free online, you know, score, but they don't see all three. So, you know, the other two may not be as high. So all of a sudden, you know, your interest rate can go down. So, I mean, go up because of that.
Raquel Ramirez09:56 - 09:57
Right.
Phil Logue09:57 - 10:20
We have the ability to increase the credit score sometimes as well. So that is something that can help get you a better interest rate. So that's something we can look at as well. Right. So that's another topic that I get into. Once we pull the credit, I give them a copy. We walk through it to make sure it's accurate. And then we look at the little section that says, how much can the score improve?
Raquel Ramirez10:20 - 10:21
Improve. Yeah.
Phil Logue10:21 - 10:32
Yeah, we talk about that as well. So I've gotten people up where they they save a significant amount of money at the closing because we got a score prior to closing. But if you wait the last second, there's not a lot of time to do it.
Raquel Ramirez10:32 - 11:44
That's right. That's right. Yeah. And I tell them you could you would be surprised. You might qualify for a lot more than you think, but you also might qualify for less. And until you know what that qualification is for, if you absolutely need money from the bank. Now, if you have cash, all the cash that you need sitting in a bank account and you're kind of figuring out your options, maybe you'll buy a cash, maybe you're financing it, maybe you're in a better position than most other people. But unless you have that hefty bank account and you need money from the bank, you need to make sure that they're willing and able to give it to you before you set off to find a house that you wanna buy. And like I said, you could qualify for 500. Maybe when you speak to your lender, you qualify actually for 600, but maybe, just maybe, you qualify for 4 or 450. And there's a big difference between a $400,000 house and a $600,000 house, especially in today's market. So I'm constantly on top of people about that to make sure that they understand the reason why it's so important. and not just that we're on top of them, you know, to get them to get through, you know, to finance with their friend or finance or whomever. Just you need to know what your purchasing power is so you're not shooting in the dark and you're not out running looking for property that you may or may not be able to afford. It's critical.
Phil Logue11:44 - 12:11
Yes, it's very critical. And, you know, we work with like 40 different lenders. Right. And these are these are mortgage lenders. They're not they're not banks that are like Citibank and the big banks. So they they're their whole entity, their whole purpose in life is to to do mortgage loans. So they've come out with a lot of different programs nowadays that just aren't available at the big banks. So we could touch a little bit on that today.
Raquel Ramirez12:11 - 12:30
I think that would be important. Yes, that's actually a really good point, because most people think in terms of all first time homebuyer program, veteran loan, conventional loan. That's it. I think that's generally speaking, I think the typical consumer only knows of those, quote unquote, three types of loans. But really, there are numerous loan options for people out there.
Phil Logue12:30 - 14:42
There are a lot of loan options. We can talk about a couple for self-employed. There are a lot of options out there now. Self-employed people you know, typically they underreport their income and they maybe overreport their expenses, right? That's kind of the plan is, you know, let's try not to pay so much in income tax, whatever. They get with their account and they do what is legal, right? But, you know, what you do in your tax return is to try to, you know, reduce your income. But when it comes to qualifying for a house, you know, more income helps. So they're kind of opposite. So you get tax returns, you look at them, they're self-employed, you're like, well, you made 500,000, but you had 400,000 expenses, so you didn't really make 500,000, you only made 100,000. So we have a program now with like bank statements, business bank statements. So there's lenders out there, or they don't look at your tax returns, they'll look at your business bank statements, they'll look at the cash flow, and they'll come up with an income, a monthly income. usually that number is pretty high. So depending on your cash flow, we do a lot of that. So that's a that's a program that's available. There's all kinds of profit loss program. There's a program where we use appraisal only for for the value and for the rent. Right. So for an investor. Yeah, we have programs for investors. Don't need tax returns. Hold on. Okay. Um, so yeah, so there are a lot of different programs, but that's another reason to kind of get with us and I'm back. All right, sorry about that. So that's another reason, because there are so many different programs out there that, you know, if you're a veteran, sometimes they don't even know about it. You can get a home with no money down, 100% financing, the rate is lower, the underwriting is a little more easier for the veterans. So I call that the best deal in town. First time home buyers, we have some programs for them. There's got to be 50, 60, 70 different loan programs out there. A lot of people just don't know they're available.
Raquel Ramirez14:42 - 15:09
Yeah, I was gonna say that we have I remember going over your list. Let's see their bank statement loans, P&L, like you mentioned, there's condo hotel loans, that service coverage ratios up to 80%. I think you mentioned for some of those, you have for national programs, of course, you have private lending, which is something else you have loans really for Oh, we have the hometown heroes program. How is that coming along? Actually? Have we run out of money yet for the hometown heroes?
Phil Logue15:09 - 15:28
Yeah, so the hometown heroes was a program that started this year for the first time, and it helps you with closing costs or down payment assistance. And initially it was available more for like teachers, nurses, doctors. So it was a little more limited.
Raquel Ramirez15:28 - 15:28
Right.
Phil Logue15:28 - 16:13
They opened it up to more people. Yeah. So so the money ran out. Right. It was so popular because basically it's it's free money from the state of Florida. You do borrow it, but you don't have to pay it back for 30 years. It's just free. No payment. So, yeah, that's great. The money is coming back next year. So They haven't announced when. The rumor is probably maybe summertime, the Hometown Heroes program will come back. So anyone getting ready by next year, remember the Hometown Heroes loan program. It's through the state of Florida. It's money they set aside. You know, it's so expensive nowadays. They're trying to help people get into homeownership. That's the goal there.
Raquel Ramirez16:13 - 16:34
Right, right. Yeah, so yeah, there's first time home buyer programs with FHA, there's conventional. I think you mentioned something about, let me see. Tell me a little bit about the condo loans without the 40 years recertification that you said that you could finance up to 90%.
Phil Logue16:36 - 17:04
OK, so going with condos right now because of, you know, what happened in Surfside with that condo and the collapse, the state of Florida has cracked down and also Fannie and Freddie, the biggest lenders in the country, the conventional lenders, they're cracking down as well. So you have non-warrantable condos. Well, they won't touch non-warrantable condos. That's right. We have lenders that will do loans on those non-warrantable condos.
Raquel Ramirez17:04 - 17:06
Really? Yeah.
Phil Logue17:06 - 17:31
It could be that the condo association doesn't have enough in reserves. Right. You know, there's all kinds of things that could trip it up. Another one is the 40-year certification. If a condo is in the middle of getting certified and they have to do the roof or whatever, they have to fix some spalling on the building. Fannie Mae, Freddie Mac, conventional lenders will do that as well. So we have lenders that can help on those condos.
Raquel Ramirez17:31 - 17:32
So really?
Phil Logue17:32 - 17:50
Yeah. And that will be a bigger and bigger problem as we get into the new rules and regulations that are required now. So we're doing more and more loans through these non-workable condos and this 40 year recertification problems that condos are running into as well.
Raquel Ramirez17:50 - 18:52
That's huge because I actually just had, I think, as you know, I had a four-part series about the situation with the condos and how difficult it was going to be for some people because if we really were going to limit ourselves to not lending or basically, yeah, not lending to any of these condo purchases, we were going to limit ourselves to cash buyers only and that was really going to hurt. the condo unit owners and the values for those units and for the people who couldn't afford, let's say, the new special assessments and if they had to sell, they were going to be limited to cash buyer only. Of course, cash buyers are going to take advantage of that situation. We were going to be finding ourselves more into a buyer's market when it comes to the condos. If you're telling me that we are going to start seeing some lenders open up avenues there for people to finance, I think that's going to bring a lot of much needed relief. Now, are there going to be any special other special criteria or are the interest rates for condos going to be higher? Is there going to be something to offset the risk there?
Phil Logue18:53 - 19:28
Correct. So the the the lenders that do these are alternative lenders, right? They are not the big banks. It's not Fannie Mae, Freddie Mac. You know, it will be the best rate. It will be a higher rate. I would say on average, probably one to two percent higher than the standard 30 year fixed rate that Fannie Freddie is offering. So there is a higher cost for it, but there is a little bit of a higher risk for the lender. So risk and return, but they're there. So that's the one thing, you know, we can figure out the payment.
Raquel Ramirez19:28 - 19:30
Sometimes the payment's not so bad.
Phil Logue19:30 - 19:36
You're like, you know what, I can afford that. So, you know, we can work all that out, you know, and see if that fits into the budget.
Raquel Ramirez19:36 - 20:06
Yeah, yeah, that's really something. I wasn't aware of that. I remember thinking there's gotta be something, something's gotta give. So this is good news. This is good news to bring some relief to that market sector. Now, when it comes to any one of these programs, I would venture to say that the pre-approval process is pretty similar, right? You have to gather a certain amount of documentation, the borrower has to sign an application, walk us through that process so that people can understand really what is expected of them, especially in the initial phase.
Phil Logue20:08 - 21:24
Yeah, so we start with the application, which is the gathering of the documents, pulling the credit report. So once we have all the documents, we submit it to underwriting. Underwriting typically is about a week to 10 days. Then the underwriter will review the file, and there will be normally hopefully an approval, or maybe a suspend or a deny. Assuming the best, we get the approval. It's usually an approval with conditions. So then at that point, we start knocking out the conditions, right? They may want another pay stuff. They may want another bank statement. They may have a question about a late payment on the credit report. They even look at addresses on the credit report. There's a lot of information, so they may look up whole addresses. what is this address? Oh, that was my grandmother's address and I got to pull it. I lived in her house for a couple of years. So, you know, it could be a question about the appraisal, which you don't have to answer. It could be a question about title. It's the title the company handles. So that's kind of how the flow goes. We knock those out. We all work together hand in hand with all the different people involved, including the borrower. Sometimes the realtor helps us out as well, solving these things. So it's kind of like a team effort. with everyone.
Raquel Ramirez21:24 - 21:25
So we knocked that out.
Phil Logue21:25 - 21:53
We have the approval with no conditions. We then hand it over to the closing department. The closing department gets together with the title company, with the realtors, the buyers, the sellers. Okay, we have a closing date coming up. when the convenient date, okay, next week on Tuesday, 10 o'clock, okay, 10 o'clock, everyone's there. So you just communicate the whole time. We walk around, you know, we threw it together all the way up until the end. That's kind of the process for the lending.
Raquel Ramirez21:54 - 23:51
Yeah, yeah. It's a tedious process. I try to remind people of that. And again, I think you've heard me talk about it in certain other presentations that setting expectations is key because a lot of people think that it's a very simple process and it can be in some cases, but I would say for most cases, it becomes a little tedious. You think that by providing your two years tax returns or say your pay stubs, your bank statements, you know, you know, your your application and a couple of other documents that that's it. But, you know, the underwriter, as you said, is going to have questions. They're not going to just look at those documents and say, yeah, everything looks good. And then they're going to pass it right along. And so I would love for you to to humor me by telling me exactly what the underwriters are looking for and why. And the reason I say that, I want it to come from you because I typically explain this to the borrowers and I say borrowers loosely because that's really your term, but to my clients, I try to explain to them that the goal is if the bank is going to lend you money, they need to be extra sure that you have the ability to pay them back honestly, right? That you're not pulling from places that, you know, that you can't, figure out what the originating source is of those funds, that you don't have any money tied up in something that they didn't catch sooner. They have to figure out what their risk is and they have to determine your ability to repay. Right. So I try to explain this to them as simply as I possibly can so they understand that the underwriters are almost there to kind of knock the deal off. They need to make sure that this is an ironclad loan that it's going to go through and that they're going to get repaid so that six months down the line, they're not looking to foreclose on your loan because the banks are not in the in the business of owning property. They're in the business of lending and getting repaid. And so I try to explain that to them. So tell me a little bit about, you know, the the underwriting process and what underwriters are are doing, why they're doing what they're doing.
Phil Logue23:52 - 25:54
Okay, so there is something called the ability to repay. And that is a law now that affects the banks. So the banks, whenever they give a loan to a borrower, they have to prove and document it in the file, the ability to repay. That's a legal standard they have to do now. So they have to make sure that you do actually have the ability to repay and it's all documented. Income, that's a big one. The debt-to-income ratio, they scrutinize all your payments, your income. Sometimes the income is kind of bumpy, right? You have a couple of pay stubs and they're all different. Well, why are they different? What's going on? Why were five hours overtime last week? Well, do you always get overtime? No, I don't always get it. Well, maybe we can count them, maybe we can't. Overtime has to have a two-year history. Bonus has to have a two-year history. Commissions have to have a two-year history. So all of a sudden they start digging in and like, wait a minute, maybe you do have more income or maybe you don't have the more income. Maybe I can count it, maybe I can't count it. So there are guidelines that the underwriters have to refer to to be able to count the income. So, you know, the debt to income is huge in the underwriting world and deciphering the income. Sometimes it can be subjective. So you have one underwriter that says, well, OK, I'll count that bonus. And some would say, no, you don't actually have two years, you have 22 months. Well, gosh, I'm only short of two months. Sometimes you can make an argument and say, hey, can we waive the two months? Maybe one underwriter will waive it, maybe one underwriter doesn't. You fight for the income. Sometimes you win, sometimes you lose. So the income is one thing. The debt, they look at the debt. Sometimes you have a car payment and it's winding down. But guess what? If it's a lease, they count it anyway. So only if you have one or two payments on a car lease, they're like, well, guess what? When that car lease ends, you're going to go get another car lease.
Raquel Ramirez25:54 - 25:57
Another car, exactly. We're going to count the car lease.
Phil Logue25:57 - 27:04
Whereas if you're going to own the car, then we don't have to count it against you. So if you have less than 10 months to go on a car payment, we don't have to count that car payment in your debt to income ratio. So if it's a loan that's paid off, we can not count against you. But if it's a lease, we're going to have to renew. We have to count. So little nuances that you would think, well, all right. money, assets. Sometimes the borrowers say, well, I loaned my brother Joe $5,000, you know, two years ago. And I called you up like, hey, I'm buying a house. I need that $5,000 back. Joe gets paid $5,000 cash. Well, guess what? Cash is not allowed. So the undergrads say, sorry, it's not allowed. It's not allowed. So all of a sudden you're like, well, I don't have $5,000. What am I going to do? You know? Things like that, you know, they can't overlook, you know, the appraisal, right? We don't do the appraisal. You don't do it. The borrower doesn't do it. The appraisal may come in and he may pick some comparables that maybe fit or maybe they don't fit.
Raquel Ramirez27:04 - 27:07
You know, then it's kind of like we got to fight that battle. Well, wait a minute.
Phil Logue27:07 - 27:37
Here's a better comparable. So there's all kinds of things that could pop up that, you know, we have to either overcome or try to work with the underwriter. On the credit report, maybe you had some late payments, right? Late payments can be a big problem, especially if they're within the last 12 months. But if you have a good medical reason, well, you know, I had whatever, I fell and broke my leg, I was in the hospital for a month. you know, they'll work with you.
Raquel Ramirez27:37 - 27:40
They'll say, okay, that makes sense. You know, document it.
Phil Logue27:40 - 27:59
You know, here's the medical report. We'll do a letter of explanation. They'll be like, okay, you know, you had a bunch of lates recently, but we can, we can get around that because you have a really good reason. It wasn't like, well, I didn't pay because I forgot or, you know, whatever. So those are all the different things that could pop up. And the list is wide. I mean,
Raquel Ramirez27:59 - 28:01
That's exactly right.
Phil Logue28:01 - 28:41
Come up. I mean, I had I had a good friend of mine's sister. She did along with me and an address in Montana popped up. And she's like, what is that? And then she remembers. She goes, oh, my gosh, our grandmother. gave us land that they own, land, right? In Montana, like way long ago. And so we had to go and document the land, that there wasn't a loan on it, was there insurance? No, it was just raw land. So the strangest things can just pop up that you didn't know about, that we don't know about, but the underwriter finds it. The technology now and the things they find, it's incredible.
Raquel Ramirez28:41 - 29:23
It's true, it's true. And then there are things that, can be avoided, right? And these are the things that I remind them very often during the transaction because a lot of people get excited and they decide, you know what? We're so excited. We're closing in three weeks. We want to go and get all new furniture. Please don't do that. Don't max your credit card or don't open new credit lines for furniture. Wait until you close. Or let's say your neighbor, your best friend, your aunt needs a loan and you decide to transfer over, even though it's chase to chase. And you say, I'm going to sell her, you know, six thousand dollars because she needs it for this and she's going to give it right back to me. Those are things that are red flags for banks. Am I right?
Phil Logue29:23 - 29:39
Yes. So whenever you're getting a loan, especially a mortgage loan, you really don't want to do anything credit wise. You don't want to borrow any more money. You don't want to go get a car. Like you said, don't buy the furniture yet until the closing.
Raquel Ramirez29:39 - 29:40
That's right. I had deals blow up.
Phil Logue29:40 - 29:43
We're like, oh, we went and bought $10,000 in furniture.
Raquel Ramirez29:43 - 29:44
Mm-hmm.
Phil Logue29:44 - 30:32
They check that. They get notifications. If you haven't borrowed any money, any more money all the way up until the closing. You know, oh, my car broke down. So we went out and got a car. And got a new one. Yeah. Now your debt to income ratio is off. You know, like, what do I do? Yeah. Oh, you have to be careful about anything you do. I would talk to your loan officer first. First, they are. Well, we're going to close in two weeks. Can you wait two weeks? Yeah. OK, I need to call sign for my daughter for her to buy a car. OK, we'll wait. You know, so you have to be extremely careful with your credit on doing anything with that that could affect the score or could increase your debt because that's right. They will get notifications all the way up until the day of closing.
Raquel Ramirez30:33 - 30:34
That is absolutely true.
Phil Logue30:34 - 30:39
With a job. I've had people leave their job the day or two or three before closing.
Raquel Ramirez30:39 - 30:48
Just about to say that. They call. To verify. Yeah, like the day before closing. Can I talk to Hero Resources? Is Raquel still working here? Yes, she is.
Phil Logue30:48 - 30:53
OK, thank you very much. That's it. Just a little phone call. Or no, she left last week. What?
Raquel Ramirez30:54 - 31:52
Or Steve was fired two days ago. What? Those things happen. I'm glad you brought it up because that was next on my list to tell you, let's talk about employment. I know that there is, or rather I want you to confirm, if you decide you, I mean, let's say you have an amazing job opportunity, you've been nursing this job opportunity back and forth, you know, somebody made you a great job offering, you decide to go, I don't know, you're an executive in Bank A, and now you're going to jump to Bank B, and you're going to be executive there. That's what they call, I believe, a lateral movement, right, where you go from the same line of work to the same line of work, and there really is no major impact or at least negative impact to your income and to your status, if you will. Does that have any merit on your loan process? Does it affect your loan process? Or if you decide to go from, I don't know, becoming an electrician, uh, you know, to, I don't know, to selling cell phone service. I mean, what about that? Can that affect your, your loan process?
Phil Logue31:53 - 32:30
That can too. So, you know, when you, when we make application, obviously we fill in, you know, what you do now, who you work for, what's your title, how much income you have. So then all of a sudden, if you change jobs, right, they're going to find out. Now, in a lot of cases, changing jobs won't hurt the application, but then we got to scramble and get the new documentation. The new company, what's your job title? Is it salary? I've had people say, well, I feel I just changed jobs and I'm now 100% commissioned. Well, guess what?
Raquel Ramirez32:30 - 32:32
You don't have a two-year history.
Phil Logue32:32 - 32:40
They're not going to give you any credit for income. Because under the rules, if you're commissions, they need to your history.
Raquel Ramirez32:40 - 32:41
They're like, no, make more money.
Phil Logue32:41 - 33:45
And then, you know, they promised me this and that. I'm like, well, they're not going to work on a promise. So you have to be very careful about switching jobs during the loan process. Sometimes it's unavoidable. In a lot of cases, if it's in the same field or same title, or there is some type of connection, the underwriters would be like, okay, we're okay with that. You're a nurse and you switch to another hospital. But if you go from one extreme to another, that could pose a problem because there's no way this is totally out of your field. It's not something you've been doing. You know, maybe it doesn't work out that you got this mortgage. How are you going to pay it? So I would say before you make any jumps, again, consult your loan officer about what you think you're doing so you can kind of talk strategy to make sure, you know, because we can call the underwriters and say, hey, Raquel is thinking of switching. She's going to do this. We're going to document it. We're going to get some pay stubs, maybe a letter from Human Resources explaining what a job description is.
Raquel Ramirez33:45 - 33:49
They'll work with us. They want to do the loan.
Phil Logue33:49 - 33:57
The mortgage lenders I work with, they want to do the loan, but they also have to be careful because of the ability to repay requirement. They have to document that.
Raquel Ramirez33:57 - 35:03
That's right. That's right. Now we've talked about a lot of different things that can affect your eligibility, basically the approval of your loan. We've been talking a lot about it. It's a hot topic now, of course, it's the matter of the interest rates and the interest rates can potentially price you out, right? We've seen that actually in the last few years. I'm sure you've seen it far more than I have. But I've had a couple of clients in the last couple of years that have been priced out of the market because they waited so long. They were either too picky or unsure, and they were waiting because they thought the market would crash, despite all my efforts to convince them otherwise. And by waiting so long, they went from, say, being pre-qualified for three and a half interest rate to, say, a six. Right. Even though we're close to the eights or sometimes in the eights, you know, that interest rate has now gone up two points, three points, and now they no longer qualify because obviously the interest rate increases their their payment. And so between their debt to income, they just they can no longer afford that payment at that interest rate. Let's talk a little bit about that and how you see interest rates fluctuating now and into the future.
Phil Logue35:03 - 38:17
Yeah, so interest rates play a big part of the qualifying. We had super low rates a few years back during the pandemic. We probably had the lowest rates I've ever seen since I got in in 1988. And when I got in, fixed rates were at 12%. We got rates down to 2% and 3% fixed rates, which was really good for home buyers because that gave you much more buying power. That's probably part of the reason why the home prices went up so much is that the rates were so low, they could afford to overpay, right? So you had that feeding frenzy. Well, guess what? Now it's the opposite. Rates have gone up extremely fast. mostly due to inflation. So the Federal Reserve has purposely raised rates. So we are now looking at the conventional Fannie, Freddie, probably almost at 8% now. So we've gone from two, 3% to high sevens, 8%. That has had a really harsh effect on home buyers because that payment is now going up hundreds of dollars per month, hundreds of dollars per month. And that knocks a lot of people out. What's going to happen to rates? No one really knows, but you can kind of get a feel for it a little bit and then read some of the tea leaves that's going on. The Federal Reserve purposely raised rates because they wanted to slow down inflation. Inflation has come down, but there still is some inflation that's there according to the data. The data comes out every month. The government monitors the CPI, the Consumer Price Index, the PPI, the Producer Price Index, along with a bunch of other metrics that they follow. They're still seeing some inflation. They want to get it down to 2%. We're probably looking at about 4%. That last 2% is going to be the hardest. We were up to 9% inflation at one point. So we went from 9% down to 4%, which is great news. But to get from 4% to 2%, that's going to be the toughest part. So they have raised rates, and the saying is higher for longer. So I'm not sure the Fed will increase rates much more, maybe even no more, but they're not going to lower rates right now. They're going to keep them high for a long time. That's the word you hear now, higher for longer. So even though we may not go higher on the rates, we may not see lower rates for a while. How long? It depends you know, when the data comes out every single month and they're not going to look at only one or two months, they're going to want to see a good track record of the data, economic data showing lower rates. I think. Obviously, through the rest of this year, for sure, probably into next year as well. Question is, when and how long? So you have economic cycles. You know, we had some great cycles and then you go into a recession. That's kind of normal. Right. Will we get a recession? At some point, we will. We always get a recession. It's inevitable.
Raquel Ramirez38:17 - 38:18
Right.
Phil Logue38:18 - 40:17
Yeah. Do we like to avoid recession? We do. But sometimes it's just inevitable. It happens in a way. It's probably healthy because you wash out some of the outside part that needs to get washed out that caused the froth, the high prices and things like that. When the recession comes, it could be a soft landing, it could be a hard landing. If it's a soft landing, which a lot of people are hoping for, rates will come down some. If it's a hard landing, where we have a hard recession, a lot of job layoffs, things like that, then the Fed will step in lower rates, mortgage rates will go down as well, adjustable, primary, things like that. So I'm guessing we will have a recession. It's just hard to say what happened next year. Maybe, maybe not. They thought there was going to be one this year and it didn't happen, right? The consumer is still spending at higher levels than everyone was anticipating. The Fed has raised rates on purpose to make cost of borrowing for consumers and for businesses higher so that way they would spend less. If people spend less, stop buying, supply and demand, okay, there's less demand, there's more supply, then maybe the prices will come down. So that's their goal that they want to do. So until they see the data, so they see prices coming down, and that would be pricing a lot of things, you know, food, housing, you know, rents, all those things, cars, used cars, new cars, all that has to kind of soften And then I think the Fed will say, OK, now we can lower the rates. But our rates, unfortunately, play a huge part in the qualifying. And right now we've got extremely high rates. I saw today on CNBC mortgage rates are back to like 2006. Right. So, you know, yeah, going way back, you know, a while before rates were this high.
Raquel Ramirez40:17 - 41:00
Yeah. Yeah. Wow. Wow. Yeah. And like I, like, like I mentioned earlier, it could make the difference between somebody qualifying, say, you know, for a $300,000 house for $500,000 house, because the rates will make a big difference in ultimately what your payment will be. So yeah, we'll have to continue to monitor it and see, you know, where the economy takes us. And hopefully, maybe I know that there was some rumor that maybe those rates might uh, come down just a little bit middle to late next year. But like, like we both know, there's no telling there's, there's no crystal ball. There's no, the only thing we can do is just monitor the rates, look at the trajectory and just keep our finger on the pulse and see, you know, how things continue to unfold.
Phil Logue41:02 - 41:31
Exactly. You just keep your eye on things. If you're looking to find out, I would continue to look that we have a good idea of what the market is. And, you know, talk to a loan officer, get pre-qualified, he'll keep you posted on how the rates are doing. And then there may be a time where like, hey, maybe we get a little correction in housing, which usually always happens. And then you get a little correction on rates. Maybe the combination of the two, all of a sudden your buying power is increased a lot.
Raquel Ramirez41:32 - 42:38
It's true. Now, the only thing I would caution people about is that if and when we do see a little relief in the rate, it is likely that these buyers who have been waiting on the sideline, they're going to jump back into the buyer pool. And we're already tight on inventory as it is. So it could very well drive the values of the properties up. a little more than they have been because they've kind of settled down a little bit. It doesn't mean we're going downwards. We are increasing. I try to show people like with my hands and gestures and on a graph, if possible, that we're still our values are still increasing. They're just not increasing at a very sharp. You know, it's not accelerating at the same pace, but we are still increasing just at a lower rate. So so when that does happen, it is possible that it'll be difficult for buyers to find a property. So if they are in the market now and they are looking around and they do find a property that they like, even if the rate isn't as favorable as they anticipate, it'll be in a year or two by the house now, because you can always refinance in the future at the lower rate, whatever that rate may be then. And then at that point, you're not competing with a buyer. you're just hoping to get, you know, to a bank that'll offer you the rate that you like.
Phil Logue42:40 - 43:14
Yeah, the average 30 year loan, the average 30 year mortgage does not last 30 years. They're usually seven to 10 years. Why? Well, because you refinance or you want to buy a bigger house and you're downsizing and you want to buy a smaller house. So yeah, I kind of agree. If you find something that you like and it's affordable, I always say buy it. And you can refi when the rates drop. You know, rates go up, rates go down. That's just how it goes, you know? And you're in now at today's price and then you refinance down the road.
Raquel Ramirez43:14 - 44:06
Yeah, that's it. That's it. You know, Phil, this has been really, really informative. I'm really glad that we did this because you provided a lot of detail to this conversation that most people really are never privy to because they don't necessarily sit and have the time to discuss these things either with people who know, like a lender like yourself or someone like me, they kind of do it when they need to. And then they rush through the process. And sometimes they don't ever really understand. But by providing this information now, I think they get a good understanding of what to expect, what options they have, how things work and why. And, you know, to to take a leap of faith, you know, on the rates now and hopefully, you know, they will readjust a little bit in the future and get a little relief on their payments if that's possible. But I really do appreciate your time. You've given me a lot to to present to my audience. And I do appreciate that very much.
Phil Logue44:07 - 44:35
All right, thank you, Raquel. I just have one last thing for disclosure purposes. We are required to disclose. So Equity Express Mortgage, the NMLS number is 203918. And Phillip Lowe, your mortgage loan officer, my NMLS number is 113491. And Raquel, thank you for having me so much. Your podcasts are so interesting. I've watched them all. I can't wait till the next one comes out.
Raquel Ramirez44:35 - 44:42
I love it. I have fans. Thanks so much, Bill. Till next time.
Phil Logue44:42 - 44:44
Okay. Thank you. Bye bye.
Raquel Ramirez44:48 - 45:05
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