Loading summary
Transcript23 lines
- [00:00]
David Green
Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no BS and no sales pitches. I'm David Green and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you, too. So if you want to build wealth through real estate or you just love learning about it, you found your home. What's going on, everyone? This is Real Talk Real Estate. Welcome to Mortgage Monday, the best, the biggest and the baddest mortgage podcast in the world. I'm here joined today by Big Brain himself, Christian Bashelder. This is a lot of Bees and we've got a Bry Br show for everybody today. What's going on, Christian, how are you?
- [00:40]
Christian Bashelder
Never cease to amaze me. David always finds the words I'm doing good.
- [00:45]
David Green
Yeah, I'm glad to hear that. And you know what else is doing good? The freaking housing market. And it is about time because we've been getting kicked in the you know where for years now from starting stubbornly high interest rates and a not so great economy. And we don't want to exhale too soon because we don't know where things are going, but it appears like a couple things are actually falling in place for the America for the American economy. It appears like a couple things are falling in place for the American economy. I recently saw that we're bringing in a lot of money from the tariffs that have been issued. And so people are kind of adjusting to that. And we haven't seen crazy high inflation. In fact, inflation has been slowed down a lot to the point that President Trump is telling Jerome Powell, hey, man, look it, there's inflation that's down. You need to drop rates. And now we're seeing that housing rates are actually coming down a little bit. So we're going to be talking about this today as well as how our listeners can know if right now is the time for them to consider refinancing a property. In the meantime, tell me about your week. What's been going on with the one brokerage?
- [01:48]
Christian Bashelder
Yeah, it seems like, man, we got a lot of applications going right now. Obviously, all the listeners, we always appreciate you guys. Obviously, we do this show for you guys and, you know, obviously we run a business as well as part of it and just want to take kind of a moment and say as much as, you know, we get a lot of good feedback and you guys appreciating us. It is Definitely mutual. We appreciate you guys and obviously watching this, checking in, following what we put out there, but also trusting us with your business, it means a lot. It's how we make our livelihood. It's. It's how David and I can do content like this and support. Support ourselves and the team that we've been fortunate enough to build. So just kind of want to take a second and say thank you to those of you listening who, who have reached out and inquired with one brokerage, you know, entrusted us with what will probably be some of the largest purchases of your lifetime. Right. Usually the biggest thing someone buys is their house. So thank you guys.
- [02:39]
David Green
That is a great point and thanks for bringing that up. We do like it when people bring us their tough ones, like, hey, this other lender couldn't do my loan. Do you think you guys can do it? But we love it even more when you come to us first and you go, hey, I trust you guys. I like you guys. Christian has a cute dog. David has great hair. I want to do my loan with the one broker. So if you're somebody who's ever messaged me and said, hey, David, I'd like to do a loan, let me be put in touch with somebody from your company. Just know you are a personal friend of mine. I consider you family and I heart you. I heart you very much. And hopefully my more of you can be doing that now because we finally got some relief. Mortgage refinance demand surges as interest rates drop further. My word, I can't remember the last time that I heard this.
- [03:24]
Christian Bashelder
It's been a minute, that's for sure.
- [03:26]
David Green
So this article comes out of cnbc and it starts by saying mortgage rates fell last week to the lowest level since April, leading current homeowners to seek savings. Applications to refinance. A home loan rose 7% last week compared with the previous week, according to the Mortgage Bankers Association. Seasonally adjusted index. Demand was 40% higher than the same week one year ago. That is a very big increase in how many people have been applying to get a loan. And since most loans that are done in the country are done through Fannie Mae and Freddie Mac, the government, which is kind of in partnership with those companies, has procedures in place for how loan applications need to be taken, which allows the government to track how many people are applying for those loans. I don't think that these numbers include all of the non QM loans. I don't think it's the same application process. So those wouldn't be in here. But, man, if the Conventional loans are up 40% from the same time a week ago. That's really good news for people that want to pay less on their mortgage, which Lord knows we need with the way that insurance has been going and taxes have been going and the overall job market has not been great. The average contract interest rate for 30 year fixed rate mortgages with conforming loan balances, which is 8006500 doll or less, anything over that is what we typically refer to as a jumbo loan, decreased from 6.79% to decreased to 6.79 from 6.88, with points also falling to 0.62 from 0.63, which includes the origination fee. For loans with a 20% down payment. That rate is 24 basis points lower than the same week one year ago. Christian Breakdown, what are basis points for the listeners?
- [05:06]
Christian Bashelder
Yeah, so those of you who kind of follow, we put out there, you know, there's, there's two main things that determine the, the affordability. Right. Of a mortgage. The first one is obviously the one that everybody's usually the most sensitive about and the most knowledgeable of is your interest rate. And it's very easy to say you can get a rate at six and a half instead of seven. Right. But the boogeyman, so to speak, the way that a lot of lenders can kind of pull one over on you is it's not just all about the interest rate. There are also points that are sometimes, not always, but sometimes included on a loan. And think about it this way, they're both a measurement of the cost of a mortgage, the interest rate you pay over the lifetime of the mortgage, the points you pay up front. So basically it's closing cost, David. Right. Points are the cost that it takes you to originate a loan. Whereas the interest rate determines your, you know, following monthly payments over 15, 30 years, whatever your loan term is or however long you keep it.
- [06:05]
David Green
So if a loan drops 24 basis points in the rate, what would it, if it was at 7% before, what would it drop to? What's 24 basis point drop?
- [06:14]
Christian Bashelder
Yeah, so 100 basis points there, we also call them BIPs sometimes in the industry is 1% of your loan amount. So this is a quarter of a percent. So for a, you know, $500,000 loan, 1% is $5,000. You'd be at a quarter of that. I didn't choose the best number. Right. But whatever, 1250, whatever that is. Yeah, 1250 dollars. So basically anybody getting a home loan, if that was the point drop, would on average be saving about 1200 bucks on the mortgage, which is pretty good.
- [06:42]
David Green
There we go. You'll notice that Christian tends to refer to loan prices in how much they cost for closing costs when everybody else asks about the rate. And that's because a lot of people don't understand that there is a direct relationship between rate and closing costs. Most people just ask the question of what's the rate? And, and then lenders can just quote you a low rate, but then that's because you're paying more in closing costs. Whereas someone in our shoes, we look at it like, well, how much money are you having to spend to get that rate? That's how the loan officer's mind works when looking at these, where the consumer tends to look at the rate. Another thing I'll notice when you read these articles, Christian, is they will say things like the average loan was 6.88%. But lenders don't all use the same interest rates. They're different. How should someone who hears that information, who's trying to figure out if they should refinance, how should they receive what an average 6.88% means in practical terms?
- [07:36]
Christian Bashelder
Yeah, good question. These articles always use the same standard borrower scenario. What I mean by that is that no borrower is the average, right? The average is the, is accumulation of, of everybody, right? Usually for these kind of estimates and soft number runnings, they use a borrower putting 20% down. It actually says that in this article, right? Putting 20% down. They use a borrower with 740fico and they use a borrower buying a primary residence. And they usually say you're buying some sort of conventional loan. So this usually will not include FHA, VA, DSCR, hard money, all the other stuff, right? This is for a 20% down primary residence, high top tier credit, normal everyday borrower, right. And this is supposed to be the, the best way to represent the standard American home buyer, which, you know, it has its flaws, but it's an average, right? Averages are what they are, what your rate is to kind of give you guys some cheat sheets. If you want to write this down. Brokers across the board that have access to a reasonable amount of lenders, we can get into what that means. But a good broker doing his due diligence, getting enough of a lending backing from his financers that allows you to kind of shave margins off the average interest rate, we can usually be anywhere from an eighth to a quarter percent lower than the average. So like that right there said it was 6, 6.8, 8 or whatever it said. Right now we're running primary residences like 6, 5 to 6, 6. So we're a decent bit below the average right now, which is good. That's great for our borrowers.
- [09:21]
David Green
Now here's why. Let me jump in there for a second, Christian. Here's why this is relevant to the people that are listening. There will be brokerages cheaper than we are. It's possible. They typically operate with virtual assistants in India or the Philippines that are processing your loan and doing your work. So the speed is much slower, the skill is much slower. Any hiccup can screw it up. And when that happens, they usually come to you with a solution that's going to be very expensive for you. We are able to offer lower than average rates while still having excellent, excellent people. Like, we have really smart people working at the one brokerage because we don't have to pay for leads. How the way most brokerages work is they have a marketing budget. So they pay for an expensive CRM and expensive ads and they flood it all over the interest rate saying, go to us, we're the cheapest. They, they then have to hire a person to field your call, convince you to do a loan with them, connect you with the loan officer. And then that loan officer is kind of like a hired gun that's getting paid for how many loans they can close and they get a percentage. So you get high pressure from everybody in the scenario and then you also end up with a higher rate because they have a marketing budget they have to pay for. We get ours from our own sphere of influence. So if you're subscribed to my newsletter, you're going to get update on the all, all the rates. Now, you know, hey, I can just reach out directly. That newsletter cost me a couple hundred bucks. It's not that expensive. Or this show, which again is we have to pay for editing and we have to pay for production and we have to pay to get it out to you. But it's not nearly as expensive. And other companies pay for marketing. So by listening to this show and reaching out to us, you are indirectly ensuring that you're going to get a cheaper interest rate when you do reach out than if you're just cruising on the Internet and you see something, you go, oh, that sounds cheap, and you click on it. Because there's probably three to four stages in that process of people that had to get paid that get cooked into the higher rate you're going to pay for that loan. Did I describe that well?
- [11:11]
Christian Bashelder
Yeah, 100 I mean, it's, it's operational capital, right? It's, you know, the pie, so to speak, can only be split so many ways. And this isn't just lending. This is where you buy your car at the car dealership, right? Obviously, the only person you really see is the sales floor manager, right? Or the salesman, you know, that's selling you the car. You may or may not see his manager that he has to go talk to always to approve the deal, right? But there's the maintenance people in the back, right? You know, there's the, there's the maintenance people that work on the car, there's the utilities, there's the lease for the 30,000 square foot warehouse they got to be in. And you know, all that gets baked in. They're not directly charging you, right, for their lease. Just like us. At one brokerage, we don't charge you for like the insurance policy that we have to have, right? But it's, it's capital, right? And the more staff you have, the more levels of things that have to go through. We make an active effort at the one brokerage to run very lean. It's, it's one of the topics of the weekly meetings that David and I have of how we can best efficient, you know, maximize the efficiency of how we run this brokerage. So ultimately we can pass the savings on to the borrowers. And not every company, not, not to mention lender, you know, operate in that regard, you know, and that's, we've, we've lost people over that mindset, right? We've lost loan officers have gone to a brokerage where they could just reaming clients, right? And unfortunately that's what our industry allows in a lot of regards, you know, but we're, we actively try to fight against that for sure.
- [12:35]
David Green
All right, now rates are down, so who should be paying attention to this, who should be refinancing and who should be like, hey, I was thinking about buying. I think this means that I should jump in the market and I should buy now.
- [12:47]
Christian Bashelder
Yeah, yeah, good question. I mean, first and foremost, anybody buying, what I always tell people is when we're going through kind of a volatile swing in interest rates, whether it's up or down, is keep your pre approval updated, right? Because if you were Pre approved for 500,000 and the market rate swung by a quarter percent or half a percent, something similar to what they've done the last month or two here, your pre approval has changed. You probably qualify for more. And if you saw that house that was at 550 and you're like, oh my God, if only. Like chances are with a half a percent rate drop, your payment may be less than what your pre approval was based on at 500,000 with a half percent higher rate, right? So not only could you potentially access your qualifying ability to get a more expensive house, but you could actually be better off in the long term because your rate will be lower. Right? So first and foremost, keep your pre approval updated if you're in the market. If you're somebody potentially looking at a refinance, my advice would be very similar. Stay in touch with your loan officer. I just had a phone call with one of our, with one of our listeners of the show actually today where I gave him some advice and guidance on when to reach out to me, yada yada. And I've said multiple times on this show, talk to your loan officer, right? Like reach out, see where the market rates are. It takes me all of like a minute and a half to price out your scenario. I can do it really quick, right? I can tell you what your average rate would be, I can tell you what your closing costs would be. Super simple, right? And unless you're asking the question, you can go on to like Mortgage News Daily or you know, CSNBC that has these things listed on their site. But once again, you're going to get the average. If you have better FICO than the average or you have more equity or you have a lower purchase price or you have whatever you, you probably aren't lined up with the average. And if you're using that to determine when to make a move, chances are you may be losing out on a good opportunity to talk to a loan officer and get a quote specific to you. So kind of the easy answer to everything. Talk to your loan officer. David, if you're looking for getting a loan, whether it's a refinance or purchase, stay updated with the market and make sure you have a loan officer that allows you to do that.
- [14:52]
David Green
Now the article ends by saying rates typically move higher if job openings are higher than expected, all else being equal, adding that this data driven volatility is nothing compared with what could be seen on Thursday following the government's release of the monthly employment report. So Thursday will be tomorrow. If you're listening to this, that's already happened. So we'll probably have an update on what that report said and what this could mean for rates. But I will say I am excited to hear rates have finally gone down. In fact, we're going to be doing a recording In a minute here about what Donald Trump said to Jerome Powell. He wrote him a hand litten, handwritten letter he did telling him that he's a. We're going to be covering that here. As well as the pressure Trump is putting on PAL to drop these rates. What was that line that Moses said to Pharaoh? Let my people go, let my rates drop.
- [15:40]
Christian Bashelder
Jerome Powell is the pharaoh, right?
- [15:41]
David Green
Yep. Stubbornly. I will not. I want them high. Yeah. It's a complex thing because even though, because a lot of people listening to this, they don't want rates to go down because they understand if rates go down, that means the prices of things could go up, which is true. But typically when you hear the news, you get things that are factually accurate, but they're just not everything that's factually accurate. You get a sliver of truth. So while lower interest rates can lead to higher prices on certain things, especially things that are directly tied to financing, because if you're getting a lower rate, more people are going to buy them. Demand goes up, prices can go higher. It's also tied to the national debt that we have to pay. So when rates are high like they are now, the US has to spend more money to pay back the people we've already borrowed money from. The deficit for the country grows greater. We have less money that we can pour into the economy to try to get it spurred, to try to create jobs, to try to get money changing hands. And so it's a complicated situation. And although the news reports on it frequently, they rarely report the whole story. They'll tell you the piece of how a rate drop or rate increase would affect the part that they want you to pay attention to. They'll leave the rest out. Here we try to do our very best to give you the whole story so that you can make good decisions on how to build wealth through real estate, including how to finance it.
- [16:56]
Christian Bashelder
Yeah. David, actually, on this note, I have a perfect example of this where, where the whole story can be kind of had some, some light shed on it here. A lot of people, like you said, think rates going up will directly, or rates going down, I'm sorry, will directly lead to house prices increasing. Because understanding basic supply and demand, there will be more buyers in the market who will qualify for more and that will push prices up. However, the same people were saying when rates doubled and tripled from COVID till now, real estate prices would crash because less and less people could buy. We didn't really see that happen. And the reason why is because the demand still outweighed the supply. What a lot of economists have mentioned is that in decreasing these rates, yes, it will increase demand. That is true. But there will be another factor as well, potentially balancing that out, where the people with the golden handcuffs, that's what we call it in the industry, right? The people who are locked into 2, 3, 4, 5% interest rates, who literally can't sell their house and move because they don't want to go get a 7 or 8% rate. Well, if they're leaving a 4% and getting a 5, that's a much more feasible move for a lot of people. And those ones that are on the, you know, on the verge of selling, they're on the fence. They don't know they want to be in a better school district. They're getting divorced, they're getting married, they're having kids. A lot of these people are locked into their current mortgages because there's literally not another option and they don't want to go rent. Kind of the unspoken elephant in the room is that freeing up those people to list their houses may actually have a double beneficial impact where rates can come down, increase demand. But we also see some price stability, which would kind of be the best of both worlds because you can get a lower rate, not on a, you know, super increased purchase price now. So there's, there's both sides of every story. I think it's very important for, for something like that to be said and not just hear all the headlines that oh my God, rates are going to go down, I won't be able to afford, you know, affordability worse. It may not, it may not because there's multiple factors on every side.
- [18:50]
David Green
I think that's a great point. Yeah, it's, it's almost. I have a hard time seeing how prices could get crazy and start going up really fast because lower interest rates were a part of what allowed housing prices to go up, but they were not what caused the housing prices to go up. What caused them to go up, from my perspective, was there was nowhere else to put your money. There was nothing to invest in, even the stock market. No one was really trusting it. You didn't know what to go buy. Real estate was by far your best option. You had short term rental options. You had tax loopholes where you could save money. You had bonus acceleration or accelerated appreciation that was available though. And you had the real estate professional status that you could take advantage of. And there was not enough homes. So all of the, like, smart money was flowing into your safest, best option where you could combine leverage, you could get cash flow, you could get forced appreciation. All the things I talk about in the book better than cash flow. 10 ways you make money in real estate now, lower interest rates sort of was like it allowed that to happen. It opened the gate, but it did not push everybody through the gate, if that makes sure that makes sense. When rates went up, it closed the gate. But I don't know that there's a whole lot of people trying to get in right now for just being honest. There's a lot of people that are sitting back like I want to see what's going on with the economy. I want to know I'm going to have a job. I'm worried about AI. And so the people who find where money is going to be moving to and people are going to be moving to which just to be transparent, I think is going to be the areas with lower cost of living. You can do with that what you will. But it looks pretty obvious to me people are going to be moving to where gas is cheaper, taxes are cheaper, housing is cheaper, energy is cheaper, everything is cheaper. Even if it's not full of the prettiest girls and the biggest yachts and the nicest cars. I think those people are going to do really good in real estate in the future. Christian, if people want to reach out to you, they want to get pre approved and that doesn't mean that they necessarily want to buy but they want to be ready if they find something or they just want to talk about what their options would be and what loans are available. Where can they go?
- [20:47]
Christian Bashelder
Absolutely. You can always find more about our company at the One Brokerage. Calm. That's our website. There's a little contact Us now tab in the top right. If you want to reach out to me directly, I'm findable on Instagram. My handle is at the one Broker. If you just search the One Broker it'll probably be the first thing that pops up. Send me a dm. We can schedule a time to talk, talk about rates, talk about your, your personal life, your dog, your cat, whatever you want to talk about. We're here for you. Appreciate you guys watching the show.
- [21:14]
David Green
Like we let off with yes, absolutely. And if you want to get in contact with me, easiest way is just to go to my website, davidgreen24.com and hit the chat button. I will see your messages myself. So I run a mastermind where we meet weekly and we talk about the market. If you're interested in joining that, let me know. Christian's there sometimes and we talk about things at a deeper level. If you're interested in the faith based mastermind that I run that is called Spartan League, reach out about that. And if you want to be put in touch with a loan officer for the one brokerage, let me know, let me know and I'll find the person who I think is the best fit for you. Thank you for listening. Please remember to like this show and leave us a comment letting us know what you thought. We will see you next week on Mortgage Monday.