On the show today we talk with… Keith Pitsch of Loan Depot!
Show notes for Keith Pitsch of Loan Depot
The Vantastic Life is…
– is in Kenmore WA!
Keith has had 5 concussions! True story!
Grew up in Lacenter which is north of Vancouver. There’s a huge tribal casino where my exit is. I grew up on a farm before moving up to Seattle to go to UW. And then got into the fine world of finance at a bank.
I was trying to avoid student loans like the plague. So I got to work for 3 years as a universal banker out of Larry’s Market. My main job was to sell stuff for the bank, and I needed to hit sales quotes. So I did big home equity lines of credit. I would ask everyone if they needed a home equity line of credit.
Then I worked for a mortgage broker down near Angelo’s in Burien. I managed the wear houses lines and all the profits there.
The wholesale team that I was running was closing 150-170 loans per month. So I can look at a deal in about 2 seconds and let you know if it’s going to work or not. My time in wholesale was super cool for that.
When the mortgage meltdown happened I diversified and opened an insurance company. Then I gave up the insurance gig around 2014-2015.
When you woke up in the morning you didn’t know if the underwriting guidelines were going to change.
Did you still have people that wanted to borrow at that time?
Yeah, the people that had money didn’t need more money. But the others were middle America, which could qualify, but had to deal with changing of guidelines. They just got pinched.
Back then you didn’t know if the loan was going to fund and record. There were no guarantees. Lots of uncertainty.
Let’s talk about where things sit today. Where are primary residence rates?
Rates are still amazing. If you’re buying owner occupied with 20 percent down you’re looking at high 3’s low 4’s. Non owner occ’s are around high 4’s maybe 5’s.
I’m very excited about where things are going, and think we are going to be able to buy more things on the wholesale or flip side.
We think we are insulated up here in the PNW. Do you agree?
Yes and no. We have a good link to the tech world up here. Amazon, Microsoft, and Google. They are super solid, and staying up here.
Also the best thing for us are the crazy prices down in the Bay Area.
Is there a rule of thumb for refinancing? And when to do it…
If you have mortgage insurance and have been in the house for 3 years. Work with your servicer to remove the mortgage insurance. Or if you have an FHA, you will need to refinance out of your FHA loan.
Well, there are 2 ways with FHA. With FHA you only have to bring 3.5%, and in that scenario that mortgage insurance is going to be there for the life of the loan.
With a conventional you hit 78.9% and they cannot collect the mortgage insurance anymore. The lender should be removing it at that point.
It’s 78.9% of the original loan and purchase price.
If you ask to remove it you will have to ask for an appraisal to reevaluate the value of your home.
Can you pick the lender that will do a better job of reevaluating your mortgage insurance?
Unfortunately, no. You have no control of who is going to service your loan after it gets sold on the secondary market.
So is there a benchmark here for refinancing?
There’s not a 100%. I look at them all individually.
You need to ask how long they are going to be in the house. If it’s short, it doesnt’ make sense.
What about resetting your amortization. For interest vs principle.
That goes back to how long you’re going to be in the house.
When you pay your first mortgage payment, you’re paying a lot to the bank and interest, and very little to the bottom line.
We have some really cool tools that can look at where your cost benefit is. That’s a tool that I use with all of my clients.
You know how you go to the doctor once a year, you need to go to DR Keith to see how your mortgage is doing.
What’s most important to lenders these days?
All of the above. The conventional and FHA look at the 4 – income, assets, collateral, occupation.
Total debt load not to exceed 50% your gross income. As well as your credit score. If you have a 741 score your at the top of the food chain. If you have a lower score you’re going to pay a higher rate.
The credit score is the thing that you have the most control over.
Making sure your collateral is lendable.
Also, it’s moss season, and that’s not a big issue, but please have that cleaned off before the appraiser comes out.
What’s the list that you should have.
We were just at a house where the electric bill wasn’t paid, and there was no power.
What is debt to income ratio? And is the different if we are talking about a HELOC?
Super important! This is where lenders got into trouble back in 2007-8.
50% on owner occupied
43% on non owner occupied
With W2 we are looking at gross income. This is for 24 months, but there is some wiggle room. Needs to be same line of work.
We do 24 months of average of NET income for self employed.
For real estate brokers you’re in the 2 year category. You get yourself into a problem with writing everything off.
What about paying yourself out of an S Corp?
That could work, but I haven’t seen anyone that has a salary that’s high enough to cover the mortgage minimum.
What if someone paid themselves a lot more than that?
You could and should. But you gotta pay to play the game. You’re either going to pay income taxes, or pay in other areas.
And this is all so individual. You can’t just read a book.
You need to figure it out for your own personal stuff.
Get yourself on the path by having Certain Lending and Keith Pitsch!
Look at your fingers and finger prints. That’s unique to you. That’s the same as every mortgage that I do.
Loan Depot is a national lenders. I can do WA, OR, CA, ID.
If you’re from another state… give us a shout out down below!
Integrity leads to longevity!
What’s the best way for someone to get started in real estate investing? House hack, rentals…
You don’t have to start with flipping, or wholesaling. You can go straight to the good stuff with the multi family.
What’s up Augie!
Passive cash flow is the way to go.
Number 1 education is key. Sit down with a mortgage professional. This is for highly qualified or other.
The biggest oversight that I see is the… let’s quit my job and try to do real estate. That is a DEAL KILLER!!!
Please educate yourself before quitting your job.
I also see people doing well flipping, and they quit their job. Then they decide to stop flipping and keep their rentals. But they don’t qualify without a job.
You need to talk to Keith about when you should quit your job.
You need to ask your conventional lender when you should quit your job.
I also have other lending options. Non QM (qualified mortgage).
QM says your clients meet the qualifications to repay.
Non QM says
* Bank statement loan – just looking at the deposits that are coming into your self employed bank account. The lender is making sure there is enough money coming in to service the mortgage.
* I’ve done this for a lot of restaurant owners. A lot of deposits but not a lot of income.
* House flippers that one have one deposit every 3-4 months and average them out.
1-2 points higher than non QM rates. We are talking about 6-7% rates. Still cheaper than hard money, and long term!
Could be a great way to get into a 5 year ARM or 30 year fixed.
Hard money right now is 8-12%, but the problem is that it’s not long term money. If you are going to 6 or 12 month loans, that’s all you get!
You need to look at the terms and the rate.
If you are in an acquiring stage, you need to move forward in a smart way.
You’re going to pay to play with an interest rate or paying the tax man.
The weird thing is that with a non QM loan your aren’t looking at any of the things that the bank deposits need to pay, right?
True. But if you’re going to do this you have to be in business for at least 2 years. You know how to do your books.
How does rental income go towards qualifying?
It’s awesome! We’ll give you 75% of the rent that the appraiser comes back with.
This is where a lot of house hackers do the duplex or four plex. They can use the prorated 75% of the other units to offset the money needed to qualify. Even if they aren’t rented.
On the flip side… another non QM is a debt service coverage approach. As long as your… listen to the podcast!
They don’t care how many properties you own. No limits here.
Let’s say in our area here… if you’re having all of the rent covering all the cost of your mortgage, taxes, insurance, etc. You probably have a lot of equity in your property.
I would probably do a non owner occupied HELOC. I send a lot to BECU and Key Bank.
You do have to be a traditional employee for the HELOC’S.
Is there any type of difference on the loan to value for HELOCs?
Owner occupied can go up to 95%, and non owner occupied up to 85%.
So you should be reverse engineering this, and you should talk to Keith about shaking money out of your money tree.
You might not realize that you can take on more than you realize.
The echo that sentiment. The non QL market has been changing a lot, and there are new ways to qualify coming out almost everyday.
The day that the non QL market gets better than the QL market… I’m out!
There are just going to keep being new ways that keep popping up!
If someone wants to skip hard money, not that we don’t love Certain Lending. We love them because they are honest. I love this. But how can someone get started and skip the hard money?
For flipping or doing a BRRRR
FHA has a rehab loan that’s great, but you need to be owner occupied. This is the biggest opportunity. Go buy the crappiest house on the block, bling it out, and sit on equity.
There are two sets… repairs under 35k and over 35k. You can leverage 65% of the after repaired value. All with only 3.5% down!!!
Fanny May launched a non owner occupied single family residence loan. It’s awesome! No first time how buyer. You do have to traditionally qualify.
You need to get your info from Keith here! If you know the right people you need to talk to them and get it sorted out.
Conversations are free. Educated yourself and choose your own adventure.
These are the things we talk about at our weekly masterminds. In Tuesday at 12-2pm in Burien at Angelo’s. We have a private room there.
We are in Redmond on Thursday’s from 10am – 12pm at Family Pancake House.
These are for everyone! Wholesalers, flippers, lenders, buy and hold, everybody!
We usually only have 8-20 people.
Instagram at KP.MoneyMan