Real Talk Real Estate with David Greene: Episode Summary Episode: Rate Update, Trump's Dilemma and Successful BRRRR | Mortgage Monday
Release Date: December 9, 2024
Hosts: David Greene & Christian Bosselder

1. Conforming Loan Limits Increase

Overview:
David Greene opens the episode by introducing Christian Bosselder, who delves into the recent changes in conforming loan limits. Conforming loan limits determine the maximum mortgage amount that government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac will insure. These limits are periodically adjusted based on housing market dynamics and inflation.

Key Points:

• Definition & Importance: Conforming loan limits dictate whether a loan is considered "conforming" or "jumbo." Conforming loans are generally more accessible and come with better terms compared to jumbo loans.

• Annual Adjustments: Christian highlights that in California, a high-cost state, the conforming loan limit for a one-unit property increased from $726,000 in 2020 to $802,000 in 2024. This adjustment reflects inflation and rising property values.

• Regional Variations: Loan limits vary by county and state. For example, in states like Kansas and Kentucky, limits are lower, typically ranging between $400,000 to $600,000.

Notable Quotes:

• Christian Bosselder [01:04]: “Conforming loan limits are the maximum threshold in terms of loan amount that you can go to before your loan becomes what's known as jumbo.”

• Christian Bosselder [04:50]: “There's a little bit more wiggle room in certain counties before you become jumbo.”

Advice to Borrowers:

• Re-assessment Opportunity: Borrowers nearing the conforming loan limit should reconnect with their loan officers. With the increased limits, some may now qualify for conventional loans instead of jumbo loans, potentially securing better interest rates and terms.

• Down Payment Strategies: Increasing the loan limit could allow borrowers to reduce their down payment, making homeownership more attainable.

2. Navigating Jumbo Loans and the Fusion Product

Overview:
David and Christian discuss the challenges of jumbo loans, which exceed the conforming loan limits and typically come with higher interest rates and stricter qualification criteria. Christian introduces the Fusion product offered by their brokerage as a solution to mitigate some of these challenges.

Key Points:

• Jumbo vs. Conventional Loans: Jumbo loans often require higher down payments (10-20%) and come with higher interest rates compared to conventional loans (3-10% down).

• Fusion Product: This innovative product splits a single large mortgage into two separate loans—typically a first mortgage covering 60-70% of the loan amount and a second mortgage covering the remaining 10-20%. By doing so, the overall loan amount stays below the jumbo threshold, potentially reducing interest rates and down payment requirements.

Notable Quotes:

• David Green [06:37]: “If someone is in the jumbo territory, they can't get around it. We at The One Brokerage have a Fusion product that can actually save people boatloads and buttloads of money.”

• Christian Bosselder [07:01]: “Instead of getting you one large jumbo loan, we actually split your mortgage into two different loans. So you get like a 60 or a 70% first, and then a 10 to 20% second.”

Client Success Story: Christian shares a case where a client with a $2.2 million purchase used a traditional jumbo loan through Wells Fargo, which demanded a 25% down payment. By switching to their brokerage, the client secured a 10% down payment without PMI, saving approximately 15% on the down payment.

Notable Quotes:

• Christian Bosselder [08:08]: “We were able to obtain him a 10% down jumbo loan with no PMI. That compared pretty well. When you consider the savings that he realized, that's 15% of a two plus million dollar purchase. That's a lot of money.”

3. Current Mortgage Rate Landscape and Future Predictions

Overview:
The discussion shifts to the current state of mortgage rates, which are experiencing volatility. David references data from Zillow, noting slight decreases in popular mortgage rates despite overall rate instability.

Key Points:

• Current Rates:

  • 30-year fixed: 6.59% (down 2 basis points)
  • 15-year fixed: 5.91% (down 4 basis points)
  • 5/1 ARM: 7.15% (down 9 basis points)

• Varied Loan Products: Mortgage rates vary significantly across different loan terms (e.g., 15-year vs. 30-year), influencing borrowers' choices based on their financial situations and goals.

• Christian's Advice on Choosing Loan Terms:

  • Qualification: Shorter-term loans like 15-year mortgages require higher income levels due to larger monthly payments.
  • Affordability: Borrowers must assess their ability to manage higher payments in exchange for lower interest rates and faster loan payoff.

Notable Quotes:

• Christian Bosselder [12:29]: “When you have a 15-year mortgage, as you guys saw in that screenshot David shared, the rates are lower. But you're paying off your loan in half the time with a substantially larger monthly payment.”

4. Trump's Influence on Mortgage Rates

Overview:
An opinion piece from the Washington Post discusses President Donald Trump's challenges regarding the housing crisis and rising mortgage rates. The hosts explore whether Trump can influence mortgage rates to fulfill his promises.

Key Points:

• Policy Impact: Presidential influence on mortgage rates is indirect, primarily through fiscal policies and appointments. While the Federal Reserve sets interest rates, the administration can impact economic factors like inflation and unemployment, which in turn affect mortgage rates.

• Historical Context: Trump’s appointment of Jerome Powell as Fed Chair in 2017 has had lasting impacts on monetary policy. However, direct control over mortgage rates is limited.

• Future Predictions: Christian suggests that achieving a sub-5% mortgage rate might be possible by early 2026, considering economic policies and potential rate cuts.

Notable Quotes:

• Christian Bosselder [18:25]: “I think a healthy economy will always hover between 4 and 6% on long term debt. I don't think we should ever get to 2% again because you have to pay for that substantially after the fact.”

• David Green [17:10]: “If you're right, that would mean buying real estate in 2025 and refinancing in 2026 would be the way to go.”

5. Successful BRRRR Strategy Implementation

Overview:
Christian presents a client success story demonstrating the effective use of the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy using The One Brokerage’s loan products.

Key Points:

• BRRRR Process:

  • Buy: Acquisition of a property.
  • Rehab: Renovation to increase property value.
  • Rent: Leasing the property to generate income.
  • Refinance: Securing a new mortgage based on the increased property value.
  • Repeat: Reinvesting the refinanced funds into additional properties.

• Loan Strategy: The client utilized a bridge loan for the purchase and renovation, securing 90% of the project cost with only $35,000 down instead of the traditional $110,000. The renovation was completed swiftly in two months, minimizing interest costs.

• Financial Benefits: By refinancing into a DSCR (Debt Service Coverage Ratio) loan based on rental income, the client transitioned from a high-interest bridge loan to a more favorable long-term mortgage, saving significantly on interest and maintaining lower out-of-pocket expenses.

Notable Quotes:

• Christian Bosselder [21:04]: “Instead of getting you one large jumbo loan, we actually split your mortgage into two different loans. We got him 90% of the cost of his project, so he put $35,000 down instead of $110,000.”

• Christian Bosselder [24:07]: “Seeing the BRRRR process work so efficiently—saving on out-of-pocket costs, limiting interest paid, and securing a long-term mortgage—is just beautiful.”

6. Final Thoughts and Community Engagement

Overview:
David and Christian conclude the episode by emphasizing the importance of working with knowledgeable mortgage brokers to navigate complex loan options. They encourage listeners to engage with their community through various platforms and to reach out directly for personalized assistance.

Key Points:

• Expert Guidance: Mortgage brokers like Christian can offer tailored solutions that traditional banks may not provide, enhancing financial outcomes for borrowers.

• Community Building: Listeners are encouraged to join the Real Talk Real Estate community, follow the hosts on social media, and participate in future podcast episodes by submitting questions.

Notable Quotes:

• David Green [24:07]: “Everybody's rushing to [real estate], which is why we finance it, which is why we make this content for everyone who is obsessed with it.”

• Christian Bosselder [25:32]: “The best way to reach me is via direct email at Christian@the1brokerage.com.”

Conclusion

In this episode of Real Talk Real Estate with David Greene, listeners gain valuable insights into the evolving landscape of mortgage loan limits, innovative financing products like the Fusion loan, and strategic approaches to real estate investment through the BRRRR method. The hosts provide expert opinions on the potential influence of political figures on mortgage rates and offer actionable advice for borrowers navigating the complexities of the current housing market. Whether you're a seasoned investor or a first-time homebuyer, the episode equips you with the knowledge to make informed financial decisions in the dynamic world of real estate.

Stay Connected:

• Website: realtalkrealestate.com (Coming Soon)
• Christian Bosselder’s Contact: the1brokerage.com | Email: Christian@the1brokerage.com
• Follow David Greene: Instagram @DavidGreen24 (Potential rebranding to Real Talk Real Estate)

Subscribe:
Listen to future episodes on Spotify, Apple Podcasts, or through the David Green Show channel to continue leveling up your real estate game.