On the show today we have an… Strategic Financing Update for 2020 with Keith Pitsch!
Listen on: Apple Podcasts | Stitcher | Spotify
Show Links:
– Contact Keith at: 206-713-9063 – call or text – KeithPitsch@LoanDepot.com
– Loan Depot website
– Joseph Kidworth on credit repair
– Real Estate Now on Facebook – Thursday’s at 10am
Show notes for Strategic Financing Update for 2020 with Keith Pitsch!
The Vantastic Life is…
– is in Susanville CA!
All good in the hood! Julie is cleaning out a house and going to the dump with a U-Haul.
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Julie
What are you up to?
Joe
I’m back to van life and slowly headed down to the Grand Canyon for a 2 week trip down the canyon.
Julie
Well now I have to go back into worry mode.
But let’s get our guest on here because he makes me feel not worried.
Keith, how are you doing?
Keith
It’s going great! Both the 15 and 30 year fixed rate loans are somewhere in the 2%’s. It’s been very busy in the mortgage world!
We don’t even have time to post on social media right now.
If you haven’t looked at what you have available to you… you owe it to yourself to at least have a conversation. Those are free! We haven’t stared charging for those yet.
Julie
You should check in with your conventional lender like you check in with your doctor.
Keith
And you don’t even have a co-pay.
One of those check in items. There’s a huge different in mortgage insurance by going down to 85%.
Julie
To get rid of it you have to go down to 20%, right?
Keith
Yep, or… 78%.
Julie
Do you have to have a time limit for a loan?
Keith
No. If you paid down the loan to a 78% benchmark.
If you’re non FHA… you have to physically make the request for getting rid of your mortgage insurance. And your servicer could have different policies about mortgage insurance.
Julie
Should you be asking about this when you get a mortgage?
Keith
You could, but the mortgage professionals can’t always guarantee something like this. Things are changing so fast right now.
You can ask what their current policy is, but there are no guarantees in life.
Julie
Like Joe’s friend that just broke a bunch of ribs mountain biking.
What are some things that you should be looking at right now?
Keith
Mortgage insurance
Lowering loan to value
The appraised value will dictate the new loan to value.
Julie
But people haven’t had their 4% rates that long.
Keith
YES! Less than 2 years ago we had interest rates twice as high!
PMI is definitely one.
With rates being so low. Grabbing a 15 year fixed or 20 year fixed is a great way to low the rate of your mortgage.
I was working with a client and looking at the difference in a 30 year vs. a 15 year, and the amount of interested she was going to pay was drastically lower!
If you want to pay down fast… 15 and 20 year mortgages are so low right now that you need to look at it.
Julie
You should look at it as not only lowering your payment, but you should look at lowering the amount that you’ll pay over time. By moving from a 30 year to a 15 year mortgage with the same monthly payment.
Keith
Yes, there are lots of opportunities with this economic situation that we’re in. And the market is just crushing it! I don’t think we will see any deprecation. I’m still seeing multiple offers on anything under 1 million dollars.
Julie
I just had a fist fight at over 1 million dollars.
As we are talking about his (dropping your term down). When you want to have your mortgage paid down to a certain amount by a certain year.
Could someone with rentals…
Keith
My strategy is… keep leverage on investment properties and pay down principle residence, and then turn around and use HELOC’s for their investments. Then you get away from using hard money.
Julie
The frosting on the top right now is that the rates are so low. It’s about getting the term down, right?
Keith
We have to have the conversation about where you are in your real estate plan. We have to have a fine balance.
We have to look at what your long term goals are. You need to be looking at your plan and where you want to be a few years down the road.
There are a lot of moving pieces.
We also have to be cognizant about how much equity people have in their houses. Banks are asking for people to have more reserves in place. And I think this will get more and more stringent in the investor world.
Julie
What are the reserve requirements these days?
Keith
You better have 6 months of principle, taxes, and insurance available for each property.
Julie
Let’s talk about self employed and business owners.
Keith
Don’t quit your day job.
Investors that were playing the BRRR and cash flow game. You the landlord have to prove that you’ve received rent in the prior two months.
If you have a duplex where a tenant didn’t pay… we are looking at the whole duplex as being unstable, and your income has to make that up.
We have to see that you have that rent coming in.
Julie
Investors should be looking at C properties that have loans maturing.
Keith
Yeah, that would be a good plan.
Julie
C class means no renovations or amenities.
There’s probably some kind of master lease thing that could happen there.
Keith
If you have tenants that are paying you right now…. Get it done now!
Julie
What is the new political update?
Keith
Executive order is unemployment is down to $400 until they come to an agreement. I don’t know the time limit on that.
We just need our congress women and senators to make something happen.
Julie
So 6 months reserves per property for rental properties. What if you have 6 properties and you don’t have enough on one of them?
Keith
It’s a light switch, either you have it or you don’t. They can come from 60% of your retirement.
But, you should have 6 months of reserves on each property or you’re a bad thing away from putting yourself into trouble.
Make sure you’re properly leveraged.
I think that the C class is going to have a tough year.
Let’s flip to self employed people. We always take the 2 year look back and divide by 24. Right now we are looking for business statements to make sure that you’re earning income. If there’s a high difference from last year to this year… there’s a high probably that you’re going to be declined.
There are a lot of business owners that aren’t able to keep up with 2019.
Julie
If you are a broker investor…. Most of your will list your own properties. Would that be good for you to do to show income?
Keith
Not necessary. It would wash out.
I see this hitting the hardest for people in the service industry. My dad owns a body shop in Portland. If you need work done…
They were crushing it but have had a hard few months and can’t qualify for a mortgage. It’s tough out there.
Julie
The new way of looking at business owners is that you’re looking at 2019 and 2020 to see if you’re still within 20% of last year. You don’t want to see you declining.
You should be looking at timing of your income.
Are they going to check twice?
Keith
Yep, when you apply and after 30 or 45 days.
If you are a broker you should be talking with your clients about this.
And you have to ask if someone has gone into forbearance.
If you took forbearance (and you could still take it). If you listed the house in forbearance, you’d have to wait 3 months before you could apply for another mortgage. You’ve stopped that trade line.
We can wait up to 12 months from that forbearance.
There are bank statement loans that business owners can utilize. Non Qualified Mortgage.
Julie
OK, the non-QM mortgages.
I have to say this… EXP stock has tripled.
Keith
Wow!!!
Julie
If you are a broker wanting to build your vested retirement account… you should call me.
Keith
The non qualified mortgages. There are still great options. You can do a 24 month bank statement loan. If you still had good things going on over the last 24 months. Then we will look at the last month to see that you’re tracking back upward. Then we can look at loans.
Julie
How is that different?
Keith
This is in the non QM market. They are showing the deposits into the business, because deposits equal income.
Julie
If I’m a service industry person… and I’m showing that I have some deposits. That means to me that my income is ticking back up. So, my deposits are up but my income is down..?
Keith
Yep, we don’t care about your income, just the deposits.
Julie
Let’s break it down. How do you get into the non QM market?
Keith
I would look at your income and assets to see what you qualify for.
You have to have been in business for 5 years.
Julie
What if you have a W2 and flip on the side?
Keith
It depends on how much you make in your W2.
The business type doesn’t matter as long as you’re in for 5 years.
Julie
What if you can do a non QM loan, you’ve been in business for 5 years, but you got a break from your landlord on paying rent?
Keith
That wouldn’t come into play.
Julie
If you’re thinking about a cash out refi or HELOC, what should you do?
Keith
If you are trying to consolidate consumer debt… Do a cash out refinance. Get done with it.
If you are looking to do a flip or acquire houses…. Do a HELOC.
HELOC’s are a 10 year interest only payment period. There’s no way to get ahead on consumer debt unless you are paying more.
But using a HELOC is going to be a better deal than using hard money.
Getting a HELOC is harder to get. You need a 700+ credit score.
Julie
If you need to get your credit score up… you should checkout Joseph Kidworth
I have a client that’s planning ahead and getting out of Seattle.
Keith
If the seller of a house can get out of there and let the professionals into the house… that’s the best way to sell your house today.
This guy could do a 5% down of a new residence. Or do a cash out with the timing on the other side. The issue is closing. We are dedicated with closing on time. I can close a purchase faster than a refinance.
The mortgage industry will always look at the purchase side because there are 2 families.
Julie
The point is that you don’t have to do it alone, you have your loan doctor Keith Pitsch right here that can help you.
I like to talk to people that know what they are doing, and Keith is one of those people.
Keith
Quick note, the farther that you get away from the cities, the longer the appraisals are taking right now. So keep that in mind.
Lenders right now have opened up the box for the appraiser to do drive byes. Before COVID they were seeing it with their own eyeballs, but now they can do drive byes. And a lot of lenders have defaulted to a drive bye. You can request that they do a full appraisal.
Lenders have gone into a default of drive bye appraisals.
Julie
You also need to work with a broker that understands how to solve the issue of an appraisal that’s too low.
Call me if you need help.
Keith
This is a big concern now.
With the lack of inventory, there are less units being sold. The appraisers used to have more comps to pull from. I think we are going to find a time this winter where appraisals aren’t going to hold up as much.
Julie
I’m seeing that people want to sell right now because of the winter coming and the income issues catching up with us.
Keith
If there’s a saving grace, we haven’t been building enough housing units in this area.
Julie
The number of units sold is down 30-40%.
Keith
Right, it’s the number of houses and not the prices.
Julie
It’s area by area too, so we don’t want to look at blanket statements. Right now in King county the closings are on par.
What sticks out to me is the lower number of listings.
I like to look at the number of new listings coming on because it shows intent. The intent mindset. We know there are a lot of people that want to buy with the low rates. But it’s hard to judge the intent of the home owners.
Alright, we tried to keep this short, but we are going long.
You have to know the lending, you have to keep up to date.
Keith
Unless you’re sitting on a couple million, you need to know what lending it doing.
Julie
Thanks Keith for joining us again!
Usually Keith is with us on the Thursday masterminds that you can get on by going to https://meetup.com/seattleinvestorsclub
We do these for people to get personal help. Every single Thursday at 11:30am for 1 hour.
But, Keith what is your contact info?
Keith
KeithPitsch@LoanDepot.com
206-713-9063 for call or text
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