The Ultimate Guide To Mortgages: Everything You Must Know!

Intro hi folks the first step to home ownership for many people is getting a mortgage today we're going to talk to a mortgage lender to find out the process for starting your journey and what those mortgage lenders may offer to help you get a home you may be surprised hi folks I'm Tom Mason with West USA realy I'm Andre prisacaru with Sitting down with Andrei Fairway Mortgage who are you loated Andre I'm located on 59th Avenue in the 101 okay just north of the 101 in the shopping mall there yep right next to the EOS Fitness yeah so I'm a real estate agent Andre is a lender we wanted to go over a little bit of what's coming up in the market what we can expect in September with Fed rate cuts that have already been announced and see if there's anything that can help you prepare yourself for when the market really opens up one thing we really want to make sure is you get into the market early because once the Market opens up you're going to have a lot of competition and prices are going to go up so the earlier you can get in there starting with getting pre-qualified or getting ready the easier it's going to be for you to finally get that home and that's what we're here for to help you build that generational wealth get yourself a home uh make it comfortable for your family going forward in the future Andre what kind of special Free money - Lender Grant projects or lending options do you offer right now yeah so right right now a really hot topic has been our um grant program uh so fairy has a a grant program it's a true grant so there's no repayment required there's no higher interest rates or anything like that um it's a $7,000 Grant it's for conventional buyers so it' have to be a conventional loan product and basically we determine whether or not a client is is approved for that Grant based off of where they currently live so they would apply with us um if they live within a specific census track that's underserved basically um may qualify for that $7,000 Grant um they have to be a first-time home buyer um but with that Grant they get the $7,000 um they get a one-year free home warranty uh reduced title fees and a free appraisal so it's actually more than just 7,000 but um this has been a really great product for us because it's it's really helping clients with their down payment a lot of the programs out there for down payment assistance tend to be a bit more expensive so yes there is 0% down programs but there's going to be a higher APR underlying cost or expectations of repayment if they sell the house uh with our program it's none of that it's basically just a true grant $7,000 and it's theirs to keep great great that's a really interesting sounding program are there any locals here in Phoenix that this works the best Locations for a Lender Grant yeah I the most I've noticed that the West Valley tends to be the census tracks that are approved for that program typically it's going to be I would say you know west of the i7 um south of the 101 and north of the 10 so that whole basically Glendale Poria and then you have your further West Valley so you have like you know listfield Avendale uh tulson Buckeye especially so it it does go a bit further west south of the I 10 even uh yeah south of the 10 uh for Buckeye and then you know once you kind of get to verado which is also baky I think that's where it tends to kind of cut off a little bit um so I would say you know if if you're if you have a client if you're an agent or you are a consumer trying to buy a house and you live in the West Valley chance are you might be approved for this program um it's you know super easy just you'd have to call us and ask us give me your address i' look it up and I can let you know if you qualify um Telson is a really hot place right now mostly because of new builds so I I don't imagine this would work as well with new builds because the new builds Use Grant for New Homes? really want you to finance with them right yeah so I mean it would work on that on that that property but you would have to then compare the incentive that the new build offers as opposed to the incentive that we can offer and just see which one's better so most new builds they offer two kinds of incentives they'll offer closing cost incentives and they'll offer rate incentives this grant program is is different because it's not just closing cost but it's also down payment um those two things are different because down payment sometimes you you can't get around you can't have someone else help you with your down payment you have to come up with that yourself sure you know so maybe yeah I can get 15,000 from a new build but if I don't have the down payment I have to find a way to get that right you know so sometimes this could be a way to where you could use that 7,000 for the down payment try to negotiate a concession from the new building if it works out then we can work together sure yeah and if you didn't if you're buying a resale home and you bringing that $7,000 that be part of the down payment then you can always ask for concessions in this market over 50% of the homes are giving Seller Concessions concessions yeah because the interest rates are so high and a lot of people are using those concessions to buy down their interest rate as well so now you have down payment yet if you can get concessions you'll be able to use that for buying down the rate get yourself a better rate some of these new Builders are competing with resale and offering lower rates you know at 4.99% what's the interest rate today uh that you're offering yeah so um with like an FHA Interest Rates loan we're going to look at maybe high five so maybe 5.75 um for a conventional loan it's closer to low sixes you know FHA can be a bit more competitive with their rates but they do charge like an upfront fee so um that's financed into the loan so typically that's what causes the rate to be lower regardless of the fact every person's situation be different but we're looking in a range of high fives to low sixes and that's going to be par so basically if you have additional points you can buy it down you can get it into the fives or lower fives as well so with the FHA did they still require you to maintain mortgage insurance throughout the life of the loan yeah so that's the one thing about uh conventional loans is once you get paid off 20% of your home you can drop the Mortgage Insurance mortgage insurance exactly but FHA is they're going to charge you over time so they can offer that lower rate because they're going to get that money back over time exactly yeah and they have the the lifetime mortgage insurance and then they also have an upfront 1.75% that's FHA Loans financed into the loan um the benefit of nfha loan is it's it really is for first-time home buyers um but it it kind of lowers the barrier of Entry so you could have a 580 credit score you could have a 620 credit score and you can get the same rate that someone would have with a conventional loan with a 780 credit score yes the underlying costs are a little bit higher but it gives you the opportunity to get into that home and take advantage of that appreciation and then the idea would be that once you have more equity in the home you ref financing sure yep so that's really interesting not not only uh FHA offering a lower rate but you also have the grand program that can help along what does someone need to do in order to be prepared to take on a loan yeah it's a Steps to a Mortgage great question you know the the scope of of getting qualified for a loan I I want it to seem pretty simple right so we always look at three things look at employment down payment and credit um so your your income tells you what you can afford down payment is going to be your your necessary or or minimum requirement for uh for your equity and then your credit kind of shows us what your repayment history is uh in the past you know so to prepare you know focus on those three things don't Focus too much on everything else try to make sure that you have lower expenses right so laring expenses means don't go buy a new car uh don't try to take on new debt don't take on new uh personal loans those things tend to be the the biggest pain points uh because their payments are very very high sure um so things like that reducing the amount of uh of expenses you have on a monthly basis can help saving is is a good thing to do as well obviously having reserves is important so even if we do like a down payment assistance or we do a DPA program um there sometimes we need to have the client have $6,000 in reserves or you know $7,000 in reserves after the transaction so it's you know we can yes help them with all their costs but they they should still have a good savings themselves okay so employment down payment and credit three biggest things Employment (Self) so what if I'm self-employed like I'm a real agent I I have my own company even though I fall under West USA realy I'm really a contractor so what do I do if I'm looking to get a loan yeah so if you're self-employed uh whether you file your taxes under a Schedule C as an individual uh proprietor or escorp or a corporation you know lenders will look at your total gross income and subtract your expenses and then take your net income you know so if you're again if you're an agent and you follow your schedule C you know we we're not looking at your gross we we do want to look at your income after your expenses so as an agent I spend a lot on marketing for my clients to to sell their house uh I might help with some of the uh issues that we need to get over so even though I make x amount of dollars I really take home far less and so I really need to focus on what I'm taking home as and bring that into you guys to show you what I've made and you need two years of that two years yeah generally I always ask for two years if you've been in the industry or doing your had your business for over five years or five or more years um then you become eligible for us to use one year it's not always guaranteed so I always say hey let's just go conservative and get the two years let me run it through see if we can do one year um but five years and more typically leads to one year T so the second point we talked about employment down payment credit second Point down payment yeah is there any Down Payment limit on what can be gifted to someone to help with a down payment no so no limits on a gift um friends family if they going to lend you that money off to the side is it okay well it would have to be family so not friends you know so family would be like your your father mother sister brother Uncle that's fine um so it doesn't have to be like super close relatives it could be like a cousin if that was the case and as far as them giving you the gift I always say have them just keep the funds in their own account uh we document that they're going to give you a gift and they can send the money directly to the title company when they're in escrow it's just a lot less document ation uh sometimes when your family member gives you a gift maybe they say I'm going to give you 20,000 and you take that 20,000 in cash but you deposit 19500 and so now we cannot trace or paper trail that 19500 to that 20,000 and so we can cause a little bit of issues there all about paperwork right exactly yeah so if if you have a family member willing to give you a gift just ask them say hey just hold on to it for now um and then once we're actually under contract I'll you know your lender will give you the next steps as far as how to how to send the the last piece of that three-part puzzle is credit what if I don't use credit Credit cards yeah so if if you don't have any credit there is a way to get an approval using non-traditional credit uh so that's typically documenting 12 months of a payment history on something like your water bill your phone bill um so utilities and phone bills are typically the biggest things u a c does rent Fall in there too rent does qualify um as one of the factors but it's it's still not by itself a efficient uh determining factor for a a 12- month of History yeah so typically with non-traditional credit it is more difficult to get an approval almost I would say general rule of thumb is try to have one or two trade lines and have them be at least 12 months old Improving Your Credit okay um but there are ways sometimes where we can make something work if let's say they don't have credit they go get a credit card typically it takes about four months for their credit to start reporting their scores will start to populate and then we can consider using those scores as well next question is pre-qualification let's say I have a Prequalification client they want to go see a house under the new rules I have to get them to sign a document saying we're going to go see the house yeah at the same time I want to get them pre-qualified how long does it usually take to get someone pre-qualified or uh for that loan that they're going to need yeah so for for pre-qualification I I like to work on a loan for a couple hours just to kind of make sure I have all the uh possible situations kind of thought about and and any things that could go wrong I have a plan B for that as well the actual pre-approval or pre-qualification process can take a couple days because one the client has to give me their information and two I have to verify the information they give me with their documents and so not everyone has all their taxes or their W2s and pay stubs right on on their desktop when I talk to them so it might take maybe a day or two for them to give me those documents um but you know in the perfect world if they had those documents if they gave it to me if you call me in the morning I can get your pre- call you know either that same morning or that afternoon as long as I spend enough time working on that situation so yeah you know again going back to someone who's self-employed it makes a little bit tougher for you what if they don't have enough you know they file their taxes and they're not showing enough income what can you do to help them yeah so if they've already you know tax season's only a few months out of the year and so let's say we're in July they piled their taxes for 23 um their income wasn't enough and they want to buy a house right now there's an opportunity you know if if their income was not enough on their taxes we can do something called a bank statement loan um so a bank statement loan will basically be us taking either 24 months or 12 months of your business bank statements um and then looking at their deposits and taking that as their income basically um depending on the kind of business they have we will allocate a specific expense ratio so that meaning that let's say you own a business math now getting worried yeah well just just to keep it simple like let's say you have a bunch of employees you know maybe your expenses from the income you're earning is 50% you know cuz you have a lot of overhead depending on the kind of business you have I will um you know take your bank statements calculate the income allocate the expense ratio and then we can usually get a lot more income than what the taxes show because it's just it's just straight up what's being dep positive into your bank okay cool all right so one thing I I think is going to happen and I don't know I'm not a lender Interest Rates Changing? I'm not I I do invest in in uh the market so I do watch the market es and flows we heard Jerome pow come out today and say they're going to definitely cut by at least 25 basis points in September y so that handles the bank the the bank fund rate but that doesn't really directly impact mortgage rates but we can anticipate if they're lowering those the federal fund rate that inflation is coming down so you see may see a lowering of other rates do do you agree with that do you think that's yeah 100% yeah so same thing I mean when when the Fed was increasing rates it wasn't always a oneto one thing where the FED would raise rates today and our rates go up the same exact time but obviously as the FED raised their rates our rates also went up um same thing as the FED starts to cut rates our rates will come down as well the the thing with the with the bond market is that we do look into the future as well um so we've already kind of priced in the fact that the FED is going to cut rates in September so we've known that for a little while uh he came out this morning and made that statement so and then obviously the Market's reflected uh an improvement in the market as of this morning as well you know so that's something where it it's it's hard to say exactly how much it will change um but the fact that they AR cutting rates has already been something that's improved our our rate sheet so far sure okay yeah um yeah I've seen I think FHA Loans today are in the high high FES like 585 or something like that FHA uh the 30-year conventional still probably 63 64 right now yeah so if we do see that they drop that federal funds rate what that indicates to the market is the economy is doing okay the inflation is coming down they don't need to keep High rates anymore right because inflation is dropping and I tend to see that impacting the secondary mortgage Market or mortgage back Securities right now mortgage back Securities are adding about 2.7% to the 10year yeah to give us that but historically it should be 2.25 yeah exactly so if we can get them to lower that part and the bond comes down a little bit 10year treasury in September we might actually see this Market break open again yeah I agree probably a good time to get pre-qualified I I would agree and and a big reason why it would be a good time to get pre-qualified is because you know taking back to let's say 20 2020 2021 when rates were super low it was extremely hard to get into a home um and like you were saying earlier with concessions being a very strong uh factor in our market right now the more competition you have the less concessions you can get and and sometimes you know you don't need concessions because you have the the necessary funds um but I think concessions have been a a big factor in a lot of first-time home buyers or just people just looking to save to save money so um I have friends that own multiple houses and they always ask for concessions because why not if there's not a lot of competition you have you know as a buyer you have more more Wile room and more uh uh Power in that transaction so take those take advantage of the concessions as rates come down you start to lose that and sellers get the advantage yeah so yeah yeah and right now the I subscribe to the cromford report yeah experts in real estate I watch them all the time to see what's going on we were in a sellers Market in the lot of the Valley now we're in a balanc market for all of Phoenix yeah there's some spots where buyers have the advantage some spots sellers have the advantage uh particularly in the West Valley we're seeing a lot more that the buyers are having the advantage because there are a lot of properties on the market but not as many buyers yeah so again this is probably a good time to start thinking about getting at least pre-qualified yeah so that you preposition yourself if you decide that you find the house that you really love and you want to make that offer right now you don't have to go through the pre-qualification process uh once we write up an offer you know my clients and I get together we come up with a price we have concessions listed in there how long does it take to get qualified to get the loan approved and Loan Approval Process what's the process for that yeah so typically to get the loan approved through underwriting it's about a week maybe a week and a half um the the process for that would be you know the client reaches out to me I get a pre-qual done have their their information I have to disclose an official loan to them so I have to trigger Alan there's a official process for that they sign their disclosures um non-binding disclosures but just more so protecting the client uh from the lender just making sure that they have the fees correctly what to expect through the transaction how to read a loan estimate stuff like that so we disclose those documents to them they sign them and then we can get the loan into processing and underwriting uh so our processing turn time is is within the same day so I get the loan into processing the processor that works with my with me goes into the file she works on it she submits it into underwriting the same day and then the initial approval is a is a two-day turnaround time so she submits it in on Tuesday we get the approval back on Thursday um so that that can all happen in a week if everything goes you know according to our timeline yeah so the process will be we make the offer MH the seller accepts our offer yeah we then have a 10day due diligence period where we're going to do our inspections yep if there's appraisal needed because we're financing more than 80% of the loan we have to get the appraisal scheduled and the buyer pays for both of those out of pocket cost for them and then once we get that done and we tell you guys hey we're good we want the house everything looks good yeah uh do you need any of that paperwork do you need the appraisal of course but yeah so the the appraisal we order typically after the inspection because it is an Obtaining Appraisals out of- pocket cost uh so an inspection will cost between you know what 350 to 500 uh an appraisal will cost between 550 to 750 depending on the county so you know that's a cost I don't want them to pay for we don't want to pay for for the cost either sometimes we have to pay for it so we have the client go through the uh the inspection process make sure that the benzer has been accepted and you know everything has kind of been negotiated and then we're we know we're okay to order the appraisal because everyone's okay moving forward sure U we can get an appraisal back within the same week um so typically you know you have your 10 days out of a typical 30-day close of escro you have your 10 days right and then after that 10 days we still have 20 more days to get our our appraisal done so we can get it done with you know a couple you few days to spare just in case there's any issues with the appr it's really 48 Hours by the time the appraiser shows up to giving you a report time yeah so it's it it's a it's supposed to be like the county has specific turn time so it's supposed to be 10 days but you know it's been a little bit slower so we've been getting appraisals back a lot faster so same thing again like if I order an appraisal on Monday they'll typically plan it so that they can go inspect the property Thursday Friday or or the weekend and I'll get the report back by Monday again so it's a it's about a one week turn time so if everything goes Closing on the Home smoothly we can actually close early like 20 days after we make the offer in some cases yeah uh so we actually have data for that so it shows from start of application how many days until our clear to close um so right now we're sitting about 19 days so that's you know doesn't mean we close in 19 days but at that point clear to close means that we could have the buyer sign and they can fund the next day sure so it takes about 19 to 20 days for a typical transaction with no rushes uh no delays just kind of you know that's the timeline right so tell me a little bit about VA loans yeah so VA loans are are my favorite VA Loans loan products so um I think they're the most competitive loan out there their rates are typically going to be lower than your FHA or your conventional rates no down payment right no down payment requirements so they can put 0% down um they have no mortgage insurance either so no monthly mortgage insurance to add on to the payment so typically you can Finance more money at a lower cost than someone else would be able to you can also get an approval with a credit score as low as 580 and also have DTI or debt to income ratios a little bit higher than than normal so uh VA does say on their guidelines that it's a 41% debt to income ratio but we can get approvals at 50 55 just depends on the person's situation you have to pay points for that or in order to get it up to 50 or no no just the only reason why it would have to pay points is if you know they want to lower the rate to get it to that ratio but there's no additional cost to go over that 41 is there a funding fee with da still yes there is a funding fee so if you are disabled 10% or more then you actually get that funding fee waved you're exempt of the funding fee if you're not disabled due to any military reasons then you have you have to pay that funding fee that's similar to how FHA uh ensures their loans VA does the same thing so basically what VA does is is a treat you like a 20% down buyer with 0% down and in order to do that they have to ensure their loans with that funding sure first use it's a little over 2% uh on subsequent uses it's going to be a little bit higher with the VA loan you can have more than one uh so that's one thing that people don't really know and they always assume you can only have one VA loan at a time the VA gives you a specific amount of of entitlement or eligibility to use that loan if you buy a house and don't use all of your entitlement then you have bonus entitlement that you can use for another home oh y and then every year that loan the cabin up on the in Flag Staff yeah yeah exactly well you have to occupy it though so if you were to buy a house you would have to be occupying that property oh that's good I mean they're watch at least they're watching the money they're not just giving away but they're giving it to people who have you know have served yeah exactly so and that's another thing that uh I relate to quite a bit having been in the military for 25 years you know I look at a lot of folks uh particularly enlisted folks like myself who came out and might not have that retirement income yeah that will will cover that but you know just a part-time job may be enough to give them what they need to get that VA loan and get them into a house and you know make sure their family's taken care of you know as building that generational wealth that real estate does uh I saw a Should you buy? study the other I saw someone was talking about this on uh the news the other day that real estate's not a great investment because it only gains x amount of dollars you should invest elsewhere like in the stock market yeah but what they didn't really talk about was that if you don't own that home you're renting so you're getting nothing so you're at least making something with real estate that is uh solid it's you know it's never gone down for a long period of time ex we get dips but right now our home prices are higher than they were in 2005 when the market exploded again right exactly so we had a dip at 2008 but we're well past that now yeah well and and I think I I was looking at the numbers you know between 07 and 08 you know taking that dip and you know how long did it take those those buyers to recoup their equity in their home I think the majority of them and it would be different for every single Market but a lot of them made their money back by 2016 or 2017 so you know just again it depends on the market but you can if you take any like I was think in like 10 year periods you know so if you take any 10-year period you should always come out on top and I always always say to first-time home buyers or people just looking to invest it's like when you first buy a house I'm not always looking about how much money I can gain or how much I can cash flow or what's my my positive cash flow but more so minimizing my my losses right so gain will come after 10 15 years when you pay down that mortgage but your mortgage payment is locked in for that 30 years I might have refinanced it 10 you know five times in in that 15 years to get it to a lower rate so I always think about the future as far as when when I gain money and then as far as present how can I minimize my L and just as a homeowner on a 30-year mortgage if I make one extra payment per year I get that down to an 18-year mortgage basically so in 18 years I have it paid off at that point the price of that home is part of my net worth yeah I take if it's a $400,000 home and I owe 20,000 for a car or whatever my net worth is still $380,000 yeah because I take what I own and I subtract what I owe right exactly and I end up with net worth so I've created greater net worth than if I Is renting better? would have rented forever exactly and and rents do go up you know so that's something where yes there's times in the market where owning a house can be more expensive than renting but you know that's very like it's shortsighted honestly and and and there are people out there that say know renting is better like there's like the New York Post or the New York Times Like will post something like that where it's just like you know renting is way cheaper than than you know owning a home but you have to like it is shortsighted and sometimes you have to think about the longterm right gain so your mortgage payment is going to stay the same for 30 years or 18 years if you pay it off early the rents are going to continue to go up so you're just paying someone else's mortgage at that point and you're not building any generational you're not own anything at that point I heard that a lot with Gen Z gen Z would rather rent and not own anything and be able to pick up and move around but eventually and we see this in the statistics when you hit about age 33 that's when people start breaking down and saying you know what I need to buy a home yeah because I need some Roots I need to if I'm going to build a family or if I'm just going to build my career yeah I can't be moving around all the time so right around age 33 we start saying it happen now average home ownership age has gone up yeah with you know what has happened in the market but if we see a breakout in this market in September maybe we'll be able to bring that statistic down and get some New Home or Resale? younger folks in there yeah for sure and I'll do some I'm doing some videos right now about New home builds but there are so so many resale homes on the market right now that if they're looking to make an offer there's offers to be had and sometimes you can you can get more more for your dollar with the resell home and and nothing against new builds like new builds are are nice they new new really bu homes they have incentives but they're expensive they're they're more expensive you know like so um you can get more free dollar for for a resale home and and you know you have a a nice backyard for example like it depends on the house but like you can have a pool you can have this and you're not paying full price for that pool because it's it's kind of built into that cost of that home so anything else you want to cover oh yeah so there's a investor product investor only product Investor Loans it's called a dscr loan basically it's a loan where we don't have to do any kind of income verification and then no uh yeah no income ver if uh so basically it's just we just underwrite the property itself can the property's rent uh cover the actual mortgage expense so that's been a really nice product for people that don't have so if if you're an agent and you have an investor who's looking to see if they're going to get a return on investment you can take a look at that and tell them where they're at yeah personally I don't work with investors my goal is to work with uh middle inome folks workingclass folks to get them home that's my mission uh I don't take you know I don't work with investors at all unless I have a seller who needs to sell quickly that's the only time I have investors that I know that I can bring in and try to get a good price a decent price for the home so my goal is to find those people that really need the most amount of help and try to walk them through this process that's that is my mission that's my mission statement awesome perfect hopefully you can help me with a few of them yeah I can right well thanks Andre I appreciate the time appreciate the information we can provide to everybody uh it's a long video but if if you really want to know the inss and out sort of the nuts and bolts of what's going on in lending and how to get a loan a mortgage loan you know this is a guy who you can talk to yeah if you have any questions about that give me a call leave a comment in the video and I'll get back with you right away thank you appreciate [Music] it [Music] radio nothing to do these days