Episode Transcript
[00:00:00] Speaker A: And now welcome back to real estate and more.
[00:00:04] Speaker B: Well, good morning. Our next guest is a good friend of mine and a fellow who's assisted our buyers many times over the years. He specializes in putting together mortgage loans that help buyers buy their dream homes, especially also in first time home buyers. Bringing a wealth of lending experience to the table. This gentleman puts that experience to work for our clients as well as his. Give a big welcome to Mr. Mike Goldstein, president of Coast Capital Mortgage. Welcome to the show, Mike. Tell us a little bit about how you got started in lending, your history in the profession, so to speak.
[00:00:38] Speaker C: Well, thank you for having me on the show, Michael. I've been in the lending industry since 2001. I actually got into the industry on a fluke. I used to run an IT company, and after the big Dot bomb, I was looking for a new career and was asked to retool a mortgage company. And after working there for several weeks and helping them with a marketing program, I realized that this was a great profession and something I wanted to be in, and that's how I got started.
[00:01:07] Speaker B: I'll be darned. Tell us about how there are several loan programs that should be carefully considered and tailored to the exact borrower needs.
[00:01:16] Speaker C: Loan programs are, there's so many loan programs, Michael.
It's really figuring out what the best situation is for your borrower and having enough knowledge about the different loan programs to find the right one. That's right for the borrower. And the way we say it at Coast Capital, it's not always what you qualify for. It's what makes you sleep well at.
[00:01:41] Speaker B: Night, that's for sure. You don't want a big mortgage and you can't think of anything else in the middle of the night. You can't solve it in the middle of the night. So I understand how that is. And that's kind of interesting now with our first time home buyers in that they're looking at that mortgage rate like it's the end of end all. In order to get into a home in the Bay Area, though, it's a little bit tougher. And I recommend getting in there and then perhaps recasting the loan down the road. It might be a little bit of an uncomfortable night or two, but once you get in, then you have that very valuable make money while you sleep thing called equity appreciation in your home. Well, that's great, Mike. First time home buyers, don't you just love working with people that have never done it?
[00:02:24] Speaker C: Know there's something special about working with first time home buyers. The look in their eyes, the excitement about buying a new house, and yet you always have to remember that this is the most important thing that they've probably ever done in their life. So you have to continually educate them so that everybody makes good decisions together.
[00:02:44] Speaker B: Yeah. Well, walk me through a loan process. You have a brand new Susie and Johnny that are brand new, and they've never ever had a home before. They've been renting all their lives. They got married, they got a little baby that is just born, and they come to Mike Goldstein and they say, Mike, hey, we really want to buy this house. Realtors Michael Hatfield and Nancy Hatfield over here have this one. We would love it and we think we can afford it. What is your process from there for a first time home buyer?
[00:03:15] Speaker C: Great question. Well, it all starts with taking an application and helping them through the application, which consists of a credit report and where and how much assets they have, and then figuring out their income. And I'll tell you a story in a minute. And then putting that all together and figuring out, number one, can they afford the house? Number two, can they afford it and not be stressed out all the time? And number three, is it in a location that's good for them? So I always like to tell stories, and this is a true story about an immigrant and his wife and new baby who came to America three years ago.
They came from Algeria, actually. And the only job he could get when he first got here was driving an Uber. And he drove it and his wife drove it. And believe it or not, after two years, they made $120,000 each year driving an Uber, which just blew my mind when I looked at the numbers and actually claimed all the income on their tax return. And I was able to then take that and equate it into money and income and help them find a beautiful house, starter house in Modesto, California. Believe it or not, he's now a manager of a bank down there. So welcome to America, right?
[00:04:45] Speaker B: It can be the best ever, especially using an investment in a real estate property.
With me. When I first bought my first home, I had to take in a partner to help me with the down payment. The first mortgage I was able to assume from the seller and the rest was made up with like twelve and a half percent interest. But then once I got into it two, three years down the road, I don't remember the exact number of years I was able to refinance out of it or recast out of it. And that was really a big deal. So it's great to be able to use the real estate in the Bay Area markets to help your financial portfolio. Incidentally, on a credit report, what would be a good number for a first time home buyer as far as the three credit reports that are required?
[00:05:37] Speaker C: Well, first of all, when you look at the three scores, it's very important for everybody to understand that they look at the mid score. So you could have one that's at 721, that's at 681, that's at 640, and they're going to use the 680. But to answer your question, anything over 720 is really a good place to start. It doesn't mean you can't buy a house if you have a 600 FICO score. It doesn't mean that you can't, but it just means that your rate is going to be a little bit less, a little bit higher than if you have a great credit score.
[00:06:13] Speaker B: Okay, so your first time home buyers come to you. They believe that they can afford the mortgage payments. Then they make application to you, you run their credit, and the credit says 720. And then after you've taken a look at all of their numbers and their affordability factor, you can say, okay, well, they qualify for a loan for $600,000 or $700,000 or so forth. And the interesting point for me as being a realtor is how closely the realtor and the lender work together, because it's an integral part of any real estate transaction. So that's a good thing. So we got a first time home buyer. He's ready to go, she's ready to go, and it's a great loan. You're ready to go. We're in there, we found him a home. Then we go out and we find him the home, if we haven't found it already. And then we work hand in hand with the lender. So in that process, Michael Goldstein gives us a pre qualification or a pre approval, and there's differences in those for the purchase. And then when we have found that home and we have made an offer on behalf of our buyers, the seller can be comfortable that they can actually afford and have the financing to complete the transaction.
Mike, there's other factors involved that have to be paid for by the new buyer. You want to talk a little bit about those other.
[00:07:39] Speaker C: Know some? That's a great question, Michael. And what most young first time home buyers don't realize is it's not just your mortgage payment. There's also property taxes that have to be paid on a monthly or bi yearly basis. There's also homeowners insurance that they have to acquire and there's also basic maintenance that they have to do on a house in order to keep it running. So just because their payment might be make about number $2,000 a month for their principal and interest, they've also got to add on those other factors and understand what their total payment is a month. And that's, again, back to what makes you sleep well at night number and to keep underneath that number to make everybody happy.
[00:08:24] Speaker B: So you've got a homeowner's insurance that you add to it. Then if there's an HOA monthly payment that you have there, then there's the taxes. The taxes as a good, I call it a wag. You can figure on 1.2% of the purchase price per year to give you kind of an estimate of what the taxes will be. That's usually pretty good, unless there's additional Mellows payments or something that would be involveD. So you have the P. I. You have the insurance for homeowners and fire insurance and such. You got HOA. And you got taxes. And that number comes up to a number that has to be carefully considered by our new home buyer. Hey, Mike, let's talk about mortgage insurance. Talk to me about it.
[00:09:13] Speaker C: Well, mortgage insurance plays in anytime you're putting down less than 20% on a loan, whether it's a government insured loan like FHA or VA, or whether it's a normal Fannie Mae Freddie Mac loan. And what mortgage insurance is for is. And most people think it guarantees that you're going to make your payment, and that's not what it's really for. What it does is it guarantees the bank that they will never lose money on your loan. So just because you're not the greatest borrower in the world, just because your credit isn't exactly 720 or 800, it gives the bank the security to lend you your money that they will never lose money. And that's really what mortgage insurance is for.
[00:10:04] Speaker B: Okay, so let's say that a borrower comes in and a buyer comes in and buys a home, and he puts 5% down. And when can he get rid of that mortgage insurance?
[00:10:17] Speaker C: Great question. And the short answer is, with a Fannie Mae Freddie Mac conventional loan, it goes away automatically in five years.
With an FHA loan, which is government insured loan, it will go away in twelve or twelve and a half years.
[00:10:39] Speaker B: Is there any other way out?
[00:10:40] Speaker C: Of course there is.
[00:10:42] Speaker B: Come see Mike.
[00:10:44] Speaker C: Yeah, you come see Mike Goldstein and he refinances you. No, there's actually several ways. So, number one is if your home goes up in value, we can then order an appraisal and send it to the lender, and the lender will see that it has gone under.
Your loan to value is over under 80%, and the mortgage insurance number can then go away. That's one way. The second way is you may have made a big commission if you're a salesperson, and we can take that commission, along with the appreciation of the house, pay the loan down, you might get a gift from a family member. There's a lot of different ways, but the bottom line is, when we can prove that it's under 79%, we can make it go away.
[00:11:32] Speaker B: That's really good information to know. In the San Francisco Bay Area, we're just one set of real estate housing markets in the United States. I've always liked to use the number. There's 50,000 real estate markets in the United States with submarkets due to a price range. I've always felt this now, in the San Francisco Bay Area, we've always had such wonderful appreciation of value because it's so vibrant. It's a very desirable place for people to live. They just love living here. And they will tend to stay once they've got into the Bay Area. We've got the ocean, we've got the wine country north and south of us. We've got Carmel Peninsula, and we have the Tahoe Area up there. The values here in the Bay Area, on most all of the price ranges and housing markets are always, over time, I'm going to say that again, over time, it could be one year, not too often, but it could be ten years. You're always going to have a greater home value if you're optimistic and you go by the historical numbers here in the Bay Area, so you could, while you sleep, have home appreciation by owning your home to where it will take you out of that PMI situation in short order. And that's really something, really, to be grateful for, I think.
[00:12:53] Speaker C: Well, let me tell you a story or something that I share with homebuyers, and also a true story, which is a story about my wife and I when we bought our first house. And, oh, my God, I'm going to age myself here in 1990.
[00:13:09] Speaker B: We know you're old.
[00:13:12] Speaker C: Bought our house for $272, $272,000 in Clayton, California. Loved the house. Beautiful 2400 square foot rancher. Felt like the house that I grew up in in Los Altos. And we were loving life. But by 93, that $272,000 house was only worth 230,000. If you remember back then, Mike, you're old, too, that we had a dip in the market.
[00:13:39] Speaker B: I got a vintage.
[00:13:41] Speaker C: I got a vintage.
Well, we had a dip in the market back then, and we looked at our mortgage payment and wondered, oh, my God, did we make a bad mistake?
And Then we looked at the rental market and realized that we'd be paying pretty much what we were paying for our mortgage anyways. And we said, well, let's just stick it out.
Well, we sold that house in 2000, so we owned it for ten years and we sold it for $450,000.
So even though it went down for a few years, the overall appreciation went up and we made some great money on it. And that's why I live in Alamo today. And that's why I know you.
[00:14:22] Speaker B: Just the other day I had clients ask, what is this three day CDs that I have to wait, I have to sign a certain way and have to wait three days before the loan can be funded? A little bit on that, Mike, something.
[00:14:37] Speaker C: That, I'm glad you asked that question. And in some mortgage scenarios, you're going to run into that. And what I mean by that is we clear 80% of our loans through a great company called United Wholesale Mortgage. And with them, I'm actually able to do the CD at the beginning of the loan as long as I hit the ten criterias that I need to hit.
And when the light goes green, I can then do the CD immediately. So that way, when we get to the end of the transaction, nobody's sitting and waiting for three days and burning time on the lock, on their rate lock. And we can just close the know.
[00:15:23] Speaker B: A number of times. There seems to be some confusion with lenders. I mean, we've done a lot of deals with Coast Capital and your company, but with other lenders, I find that there seems to be a little bit of confusion, as when the loan is finally approved. And the reason I ask you, when do you say okay? It's from this side, the lending side. When is it okay to release that final loan contingency in the contract?
[00:15:52] Speaker C: It's a simple answer, and that's when we have a clear path to success. We know exactly what the last underwriting conditions are. We have them or can solve them easily. And at that point in time, it's okay to release loan contingency. Now, do I ever suggest you release them early? No, that's up to the realtor and that's up to the borrower. They can if they wish. But when I see that I have a clear path to success, then I will tell both parties immediately that we do, and now it's up to them on how they want to do it.
[00:16:28] Speaker B: Sounds good.
[00:16:29] Speaker C: But I will say one thing, and I tell everybody this. You really don't have a loan approval until you have the keys to your house.
[00:16:39] Speaker D: Yeah.
[00:16:40] Speaker B: There's so many things that can happen in between.
[00:16:42] Speaker C: Oh, my God.
[00:16:42] Speaker B: It takes a lot of coordination. Especially today's market is a little bit different. And when I say different, it's because our number of transactions per year, when I say transaction, buy, sell, transactions, has been in a constant state of decrease in number year over year for the last six years.
So if there were, for an example, 10,000 transactions per year in a specific market, the next year they've declined and they're only 7005 thousand, and now they've declined. There's not that many of actual transactions per. Looking back and comparing it with a year seven years ago, so to speak, so everybody as a buyer is afraid that they've paid too much, and everybody as a seller, looks around and they're afraid that they have not received enough money for their property. So it's always a question, and we have to say that in the process, there's always these little things happen that tend to be a weave and a bob in order to get through to the end of it. And that's why you need a full service realtor, and that's why you need a very dedicated, experienced mortgage lender to work with you hand in hand through the process. By the way, Mike, where does most of your business come from? Is it new business? Is it online? Do you do social media? Do you advertise? Where does most of your business come from?
[00:18:16] Speaker C: Every year it's different.
I have to tell you that I look at marketing campaigns just like a table. The more legs you have on the table, the sturdier the table is. So we get a percentage of our loans through Facebook, and that's really a friends and family.
We get a lot of our loans through realtors because they won't get in the car unless their clients are pre approved by us and don't want to waste their money on gas and time.
We get a lot of repeat business. Matter of fact, people who purchased homes in October, November of last year actually are in a position where they could be refinanced right now, as crazy as that sounds with the rates today, and we get a lot of first time home buyers, because even though the millennials out there and everybody says that they're not buying houses.
A funny thing happens when you get married and have a baby.
All of a sudden you start becoming your parents and that house and the security and the longevity of life all comes into play.
[00:19:23] Speaker B: Oh, yeah. Certainly changes life. Do you have a story of one of the trickiest loans that you've ever done?
[00:19:30] Speaker C: I have probably 100 stories like that.
[00:19:33] Speaker B: That's right, you're old.
[00:19:34] Speaker C: Right? That's because I'm old. But I don't look at loans as tricky because the reason I'm in this industry is because I love solving problems. And problems are what happens when you try to get your borrower's information into the box that the underwriter needs it to be in and get the loan through.
The reality is that everybody wants the proper outcome, which is to end up having the loan go through.
Let me tell you a story, and I'll call them the Smiths, although that's not their name.
I was sitting an open house in Alamo, California about seven years ago, and I had just met the realtor. Sorry, it wasn't you, Michael. Just met the realtor a few hours before because I was driving around and I saw this beautiful house and I decided to go walk in and a wonderful lady walked in and said, I love, love this house, but we can't buy the house. And I said, well, why? And this goes back to understanding your products and having enough products to be able to service the greater majority of the borrowers. And I said, why? She goes, well, we had a bankruptcy several years ago and we've been turned down by the bank, but I absolutely love this house. And the house was a two plus million dollar house.
And I asked her some basic questions, which was, what is your FICO score now and how much of a down payment you have? And at the end of our conversation, I looked at her and I said, you can buy this house.
It's not going to be a pretty loan to get into it, but the outcome will get you what you want.
I got a call about 930 that evening. And as you know, Mike, if I'm awake, I pick up my phone and there was a gentleman on the phone and telling me, you better not be, I'll use the B word.
And I said, well, Mr. Smith, and I'll go through the scenario that I did with your wife this afternoon. And I asked him the same questions and he said, you better not be lying to me, Michael.
Long story short, 30 days later, they own that house.
[00:21:54] Speaker B: That's a great story.
[00:21:56] Speaker C: And then eight months later, because what we do is we set up a game plan. And that's a really important thing to understand. Okay. You might not get the house with the loan that you want today, but you have to have a game plan of where you're going. And we knew when the bankruptcy timeline would be up, what we needed their FICO score to be at that time, what we needed their debt to income to be at that time. And in eight months, we refinanced them into a wonderful loan, which they had for a long time.
[00:22:24] Speaker B: Wow. So tie it all together. You like solving problems and applying a certain loan program to a client so it works out just the way you want it. And I think that's really admirable. And like I say, we've done many transactions with Mr. Goldstein and find him to be a hard worker, and he does answer his phone. And in this environment that we live in, that's a big deal, because sometimes the real estate market can be a little bit hostile, especially when there's not a lot of transactions on the table, not a lot of homes for sale. And people, they definitely need somebody to be their advocate and get in the trenches with them. One last thought here. The seller credit to a buyer for a buy down of mortgage interest rates, they're not happening a lot, in my view. And the reason is, we're still in a seller market. We're still seeing multiple offer situations in the properties. And sellers think, well, I'm either going to get what I want or I'm not going to move. So what are your thoughts on that? I mean, it's a great thing. Why don't you explain the mechanics of it and say why it can work well for a potential buyer.
[00:23:39] Speaker C: Well, there's two scenarios. So scenario number one is they actually have products out there right now that's called a two one or a three one buy down. And that means that the rate is going to be lower for the first few years, but then it jumps back up.
I'm not a big proponent of those products. And the only reason I'm not is that for a little bit extra money, you can have a permanent buy down on your rate. Now, what does a buy down on your rate mean?
Every rate, and it all equates to Wall Street. Every rate has a cost that's associated with it. And as you can buy down the rate by paying money, and that's called buying down your rate, the permanent buy down is really the best way to go. Now, I'll tell you that, Michael, you're one of the best people I've seen negotiating sellers credit for, and I call it, or the industry calls it non reoccurring closing costs. So it can be used to buy down your rate. It can be used for title for the fees that come with the loan. It can be used for any non reoccurring closing costs within the loan.
Other realtors I've seen out there attempt to do it, but you're really good at it.
By the way. Part of that is understanding really what this property is worth.
Do we offer a little bit more so that the seller gets the number they want and yet the appraisal will still come out to be able to finance it correctly and then use that money to buy down the rate. And really what you're doing when you're buying down the rate is, and I'm not sure if I believe them or not, but the government says we should be back in the fours in several years from now.
Well, to go from six and a half, seven down to four is probably two refinances.
And what you're doing by buying down the rate is you are getting rid of one of those finances and the costs that are involved with it.
And if rates go up, you're paying. I call it insurance that you have a better loan until the weather gets better.
[00:25:58] Speaker A: I've had a wonderful time this morning talking lending with Mike Golstein, who is the president of CO's Capital Mortgage. He may be reached at 925-202-9942 925-202-9942.
[00:26:14] Speaker E: This segment has been about the aspect of home buying. Mortgage rates have and will always fluctuate. Consider how much home appreciation over time may factor into the equation. Basing a Home buy decision solely on a mortgage rate may cause one to miss out on an opportunity as home values may increase. Ask the question, do you want to be a homeowner or do you want to sit on the sidelines until next.
[00:26:36] Speaker A: Week when we can once again peel back a layer of that onion known as our housing and real estate markets. Have a wonderful week.
[00:26:45] Speaker D: The views and opinions expressed are based on current economic and market conditions and are subject to change. Information on the show provided for illustrator purposes only and does not constitute professional or legal advice. Information from sources deemed reliable, but accuracy and completeness not guaranteed. Michael Hatfield and the Michael Hatfield Remax team have no liability for information discussed on the show. Consult with qualified professionals prior to taking action.
[00:27:14] Speaker F: We at the Michael Hatfield Remax team enjoy representing our valued clients. If you or someone you know is.
[00:27:20] Speaker E: Interested in buying or selling and wishes.
[00:27:22] Speaker F: To schedule a complimentary appointment with the Michael Hatfield Remax team. Call us at 925-32-2775 that's 925-32-2775 or go to our website, michaelhatfieldhomes.com.
[00:27:37] Speaker A: I'm Michael Hatfield. Thank you for listening today. Join us next Saturday at 09:00 a.m. For the next real estate and more when we again sharpen our focus on house the market.
[00:27:48] Speaker F: Join us next Saturday morning at nine and have a wonderful week. Best wishes and blessings to you. You 01493.
