Episode Transcript
[00:00:05] Speaker A: The Michael Hatfield Re Max team presents real estate and more.
[00:00:10] Speaker B: Bay Area real estate is different than in all of America. And why? What's up with homebuyers? What's on sellers minds? How is the market and much, much more.
[00:00:22] Speaker A: Now here's your host, Michael Hatfield. Welcome back to the real estate and more show. Thank you for listening in. Our next guest is a knowledgeable fellow who's assisted many of our buyers many times over the years with their mortgage loans. He has this unbelievable insight into what is going on in the market. He specializes in putting mortgage loans with the particular buyer clients that we have so that they may buy their dream homes. Bringing a wealth of lending experience to the table. This gentleman puts that experience to work for clients. He is a returning guest on the show. Give a big welcome to Mister Michael Goldstein, president of Coast Capital Mortgage. Welcome back, Mike.
[00:01:06] Speaker C: Well, thank you, Michael. Glad to be here again.
[00:01:08] Speaker A: It's always good to see you. You know, always get that big smile coming from you. And, you know, what else could we want, right?
[00:01:14] Speaker C: Exactly.
[00:01:15] Speaker A: Hey, Mike, refresh us on how you got started in the mortgage lending business.
[00:01:22] Speaker C: Interestingly enough, I wasn't actually even thinking about it. I was in the IT industry, had a fairly large headhunting firm, and when the dot bomb happened, I found myself retired and I started talking to a gentleman one day, having a glass of wine and told me he was in the mortgage industry and needed to help computerize his company back when computers were just getting started. This is in 2001, and I came in to help him retool his company. And after three months of doing that and computerized the whole thing, realized this looks like a lot of fun and I can help people, and that's how I got started.
[00:02:02] Speaker A: You seem to enjoy putting mortgage loans together to fit what people's circumstances are, whether or not they're refinance people, which is probably not the most vital industry prospect for you at the moment. And also with the purchasers and buyers and reverse mortgages.
Why do you like doing that? Does it make you feel good?
[00:02:24] Speaker C: For me, it's all about the hunt and the puzzle. And what I mean by that is I love to talk with people and I love to help them and figuring out how to help them. And the best way to get them into a position to where the banks will give them the money is the hunt and the puzzle.
[00:02:44] Speaker A: You do such a great job at it, for sure. You know, walk me through the loan process. What is a person? Let's just say that we've got a new buyer and we've done this numerous times over many years. We've got a new buyer, and the buyer wants to say, okay, I want to buy this house. You know that you're going to have to produce the pre qual letter, the or a pre approval letter for the actual client. What is the process?
[00:03:12] Speaker C: The first process is really gathering the information, talking to them about their income and how to prove their income, whether they're w two or whether they're self employed.
And then once you get, once I get that income, to massage it, to make sure that it's going to fit in the box that the bank wants to see. And there's many different ways to prove income, but that's probably a whole podcast all in itself.
[00:03:40] Speaker A: What about first time home buyer programs, do you have those available?
[00:03:44] Speaker C: Of course, we are a broker. So we have not only one first time homebuyer program, we probably have five, because we use many different banks to clear through. Depends on which one has the best one at the time.
But what I usually tell people is that if you can avoid the first time homebuyer programs, you usually get a little bit better rate, although you have to still put down a little bit more money.
[00:04:09] Speaker A: Yeah, rates are a big deal right now. Yeah. So what's new in those first time homebuyer programs that you've seen recently? Anything new?
[00:04:19] Speaker C: Truthfully?
[00:04:20] Speaker A: No, pretty much the same.
[00:04:21] Speaker C: The programs six, seven years ago were actually much better. Now, a lot of the programs, if you don't stay in the house long enough, you've actually got to pay back the down payment assistance part of it.
[00:04:34] Speaker A: Gotcha. You know, so many of our young buyers today, so tuned into mortgage rates, and they say, well, the mortgage rates are so high, which they're not really, especially compared with a 50 year average, but they're always worried about the rate. I have a nice colleague that works, she's a broker, she works up in the Reno Tahoe area. She has a favorite saying that I like to repeat. It's like, buy the home, date the rate. Buy the home, date the rate. Yeah. And it works because, you know, you're buying the home, you're looking for the appreciation in the home, and you're dating the rate because you can always change the rate as they come down. One thing that you and I have always seen is the rates are always going up and coming down and always fluctuating from one moment to the next. Do you agree?
[00:05:23] Speaker C: 100%? 100%. You know something? The first house my wife and I bought, the first house I've owned, was in 1990, and we bought it in Clayton, California, for $272,000 at 12% interest.
And that was from a bank.
But it was the payment. We can make the payment. Not a big deal. About a year later, we refinanced it at 10%. I thought I stole the bank, Michael.
I thought I was just the smartest guy in the world. Long story short, we sold that house at close to $600,000.10 years later, and our rate, after refinancing through those years, ended up being 4.1%.
[00:06:12] Speaker A: Oh, yeah.
[00:06:13] Speaker C: So don't ever worry about the rate. Worry about the property.
[00:06:16] Speaker A: Yeah. Buy the house. Date. The rate is actually a very good policy for a home buyer to look at. But today, you know, so many of our young buyers, which make up a large percentage of homebuyers, they're so attuned to the mortgage rate, and it prevents them from moving forward.
The second step in this is that there is not a lot of homes in inventory available for sale. There just isn't. In fact, since 2017, according to NAR National association of Realtors, there used to be 2 million homes available in the United States for sale. Now it's less than a million.
Less than a million. And most of those buyers are people that are. Are of retirement age. So they're hanging on to their two and a half to three and a half percent mortgage interest rate, or their home is paid off and they're not moving. And so if they're not moving, the inventory is going to stay.
It's going to stay sparse. So what do we do? What do we do as a home buyer? We buy the home, look for the equity appreciation, take advantage of the tax benefits, which are substantial, and then when the mortgage rates move down a little bit, just refinance. Just refinance. Wouldn't you agree?
[00:07:40] Speaker C: I agree 100%. Matter of fact, I'll even add to that, the general consensus is that even though the housing is sparse right now, you're not seeing the appreciation we did several years ago when there was a lot more houses on the market. However, and I think that is because of the interest rate. And the same house that you're going to buy right now at, let's say, six and a half percent, when rates drop back down to four, is going to appreciate a lot more. So you can spend three or $4,000 on a refinance in two years from now, or you can spend another $50,000 buying the same house.
[00:08:22] Speaker A: Hmm. Yeah. Well, yeah. You are kind of correlating the interest rates to home appreciation. And the real reason, in my view, and that's just only one man's view, is that there's going to be greater demand for the same number of loaves of bread on the shelf. And when that happens, it drives price upward.
[00:08:41] Speaker C: You're 100% correct. Matter of fact, the amount of people that could buy that same house at 4% versus 6.5% is astronomical.
[00:08:54] Speaker A: Yeah, yeah, yeah. So affordability, right?
[00:08:57] Speaker C: Exactly.
[00:08:58] Speaker A: Yeah. And that's where you like to work with the actual home buyer, each home buyer, to determine which program might work best for them to get in the property. We've had some buyers in the past that barely made it. And if your expertise wouldn't have been there, probably wouldn't have been in the home.
[00:09:17] Speaker C: Thanks, Mike.
[00:09:17] Speaker A: Yeah. And now look has pushed it forward three, four years, and we found that they've made a few hundred thousand dollars on that house. Yeah. They paid maybe a little more in interest at the time, but yet they're in the home. They have gained value. They have deferred their taxable income through mortgage interest deduction, as well as through the depreciation on the structure itself. You know, it's matching up. That rate is so, so very important. Don't you agree?
[00:09:47] Speaker C: I agree 100%.
[00:09:48] Speaker A: So how often do interest rates change?
[00:09:51] Speaker C: Every second.
[00:09:52] Speaker A: Every second.
[00:09:53] Speaker C: You know, Mike, it's really not the interest rates that change. It's the cost of the rate. You can still get a 4% rate. You can still get a 3% rate. But the cost to buy that rate is prohibitive for most people.
So you can buy your rate down to 3% right now, but it might cost you 30, 40, $50,000 to do it. Is it worth it or is it more worth it to take the current rate and then refinance in a few years? Most people would do the latter.
[00:10:25] Speaker A: Yeah, I would totally agree.
That's kind of an interesting thought. So, you know, buy it down. There's buy downs with request to sellers, but we're finding we're still in a seller's market. We just put a buyer in contract. There were eleven offers, and we actually won that one.
[00:10:45] Speaker C: You're really good at that, Mike. Most people don't know that.
[00:10:48] Speaker A: Well, thank you. Thank you for that. But the point is, we're still in a seller's market. It's really crazy. The market is in equilibrium, but it's a seller's market. Does that not sound contradictory?
[00:11:00] Speaker C: A lot of things are.
To give an example, you know, a lot of people used to love the arm products. Five, one arm. Three, one arm. And those products are actually inverted. It costs less to get a 30 year fix these days and get an arm product.
[00:11:17] Speaker A: Isn't that. I don't understand that. Why would that be?
[00:11:20] Speaker C: If I knew that, Mike? I put a million dollars down on it.
The truth is, is that it's, Wall street dictates the cost of every rate, and they are betting, the reason it's inverted is that they're betting on the 30 year fixed versus the arm.
[00:11:41] Speaker A: Well, I see the rates daily, and I see that the arms are almost as much as you said, the 30 year fixed rate. Well, why not have a 30 year fixed rate? That would be where I would go first.
[00:11:54] Speaker C: Agreed. 100%.
[00:11:55] Speaker A: Yeah.
[00:11:56] Speaker C: Quality.
[00:11:57] Speaker A: Yeah. So now one question I have is, if a person has high credit card debt, should they refinance, pay those cards down in all cases, some cases before they go ahead and make a purchase.
[00:12:11] Speaker C: The old answer was all cases. But now with the interest rates, if somebody has a two, three, even three and a half, 4% loan, it's not worth them refinancing the whole loan in order to pay off high credit cards. Most of the clients I have are going to a line of credit to stretch those payments out and pay off the credit cards. But there will come a time when those lines of credit convert and they're going to have to do the refinance, and hopefully rates will come down by that time.
It's all about management of money.
[00:12:49] Speaker A: You know, interesting folks, at various times in my career, I found that, you know, we've got lenders involved in a deal for the buyer, and the lender just tries to become too much as part of the transaction. And that way, you know, if you're an experienced agent, you've been around a long time, it can detract from what you're trying to do. And what you're trying to do is get the dream home for the client. The lender is a, that's an important component. It's the money component, along with the down payment from the borrower. But I found that doing business with you has not been a big burden in the past, and that has just been wonderful. So I have to thank you for that. We have seen recently one lender that was a major pain in the neck, and we had to keep telling the buyer, hey, listen, this is just the finance part of it, because we have to work together with the lender. But the lender doesn't run the show. You know, it has to be the agent dealing with the agent on the other side that is dealing with the sellers in order for it to work. So I wanted to compliment you for that.
[00:13:58] Speaker C: Thank you, Mike. I appreciate it. You know, it's all about transparency. If you know what's going on on my desk and I know what's going on on yours, then we're doing the best thing for the client. And at the end of the day, we, we do this all the time. We have to remember it's the most important decision they're probably going to make in their life.
[00:14:18] Speaker A: We've been listening to the real estate and more show. We are fortunate to have on the show Today Mister Mike Goldstein, president of Coast Capital Mortgage. He's sharing with us various loan programs and thoughts about the lending process for our home buyers.
We're going to take a short break. We'll be right back.
[00:14:43] Speaker D: Welcome to the real estate minute with re Max expert Michael Hatfield. Michael, what traits should we look for in selecting an agent?
[00:14:50] Speaker E: Look for a deal maker with a positive attitude who will work tirelessly for you. An agent who is adept in multiple offer situations, drafting contracts, marketing and advertising. A client's home is familiar with multiple cultures, experienced in mortgage financing, inspections and escrow is a huge asset to his client.
[00:15:11] Speaker D: What can you do as a plus for clients?
[00:15:13] Speaker E: Your agent is your eyes and your ears, one who works behind the scenes on your behalf. A great attitude, working well with others and keeping clients priorities. Number one is a given for us.
[00:15:24] Speaker D: Call 925-32-2775 now to schedule an appointment or complimentary home analysis. For excellence in real estate, call the Michael Hatfield remax team at 925-32-2775 or go to michaelhatfieldhomes.com dot.
[00:15:42] Speaker A: Now let's get back to real estate and more with your host, Michael Hatfield.
Some experts say that mortgage rates may be coming down. As a lender. What say you? Should I wait to purchase a new home or should I purchase one now?
[00:16:02] Speaker C: I think we've actually touched on that a couple times during this conversation.
But the short answer is you never wait on a good piece of property. When you're going to buy a piece of property, you're buying it with the intention of knowing you're going to sell it at some point down the future. The rate is immaterial because you're always going to take advantage of better rates as they happen.
[00:16:25] Speaker A: Absolutely. You know, one of the challenges we have in a seller's market is trying to be a non contingent offer. Now what does a non contingent offer mean? It means that the purchase agreement in California is an as is contract, but yet it has three, a minimum of three different functions for investigations, contingency, appraisal contingency and loan contingency. That means that per the contract, if you write in that you need, let's just say ten days for investigations or twelve days for appraisal contingency and twelve days for a loan contingency. It's many of the properties that in actuality that are winning the bids now because multiple offers are ones that are non contingent. How does a lender work with an agent to put that non contingency for the loan and the appraisal out there? How does the lender help with that? Help the buyer's agent to come up with a non contingent offer. How do you do that?
[00:17:40] Speaker C: Well, first and foremost, it's the upfront work. When you meet a potential buyer. At the beginning as a lender, I figure out the good, the bad and the ugly about what's going to happen in this scenario. And like, you and I have had 50, 60 conversations where I call you up and I say, hey, Mike, don't go over a million too. If you do, everything else we're going to have to come in is going to be, you know, more money.
But if you stay under a million too, we can make this thing work. And that's doing the work upfront. Me knowing your borrower and foreseeing any kind of surprises that could come up.
[00:18:20] Speaker A: We had one set of buyers and they were golden.
And we won the offer.
Our offer won out of 33 offers. There was a lot of back and forth with the listing agent to make it happen. And our objective was for our clients not to spend more money than they had to to get that dream home. The home was perfect, the inspections were beautiful.
But I remember telling the client, I'm saying, you know, the list price is this, but we're in a seller's market and we've been in a seller's market. It hasn't changed much and we're going to have to pay more. Well, how much more? And I remember telling him, and he looked at me and he got mad at me. I said, don't get me mad at me because I'm talking about the market today. You want the house or do you want to be just a race car that's in the race and running the race and submitting offers and not winning them? Submitting offers and winning them are, that's an element of expertise by your buyer's agent. It's an element of there. And then all those factors are taken put together with help from the lender, which would be you in your case, and the information that comes from you. And we have to feel grateful for that, in my view.
[00:19:42] Speaker C: Don't let a nickel stop a dollar, right?
[00:19:44] Speaker A: That's right.
[00:19:45] Speaker C: If it's a long term investment, which is what real estate is, in 20 years from now, when you've made $500 million, whatever it is you've made on this property, is $20,000 going to make that much difference?
[00:19:58] Speaker A: Yeah, it doesn't. Very, very well said. Now I'm going to kind of switch gears a little bit. What is a rate lock? You hear people talk about rate locks.
[00:20:07] Speaker C: Very simple. You, each bank who is going to lend money has to reserve that money.
And when a lender like myself locks the rate, that is telling the bank you need to commit to this amount of money, and it's got to go on their books.
And so you're tied into the amount of time you put on the rate lock, whether it's 15 or 30 days or 40 days, 45 days.
[00:20:35] Speaker A: Now, I understand that some lenders are actually looking at that lock before it closes. Have you seen that with lenders recently at all?
[00:20:44] Speaker C: I'm not understanding the question. Maybe.
[00:20:47] Speaker A: So. You lock the rate at 6.5, and the rate goes down a little bit, and they're about ready to close. There was one lender that has told me that they will look at that rate lock again one time before it closes. So this is a big bank. It's a big bank. It's probably one of their ways of getting people to get involved.
[00:21:10] Speaker C: I think the better way to look at it is as a bank. If you know that you have $400 million worth of locks at x percent and the interest rate has gone up or gone down, they need to be able to hedge themselves. In other words, if rates go up, they can actually sell that lock for more money than they locked it for. They make a little bit of a spread, and therefore they do have the margin at times in order to help on the backside. It's very risky, though.
[00:21:43] Speaker A: Wow. Now, I understand that stated loans are actually coming back. Is that true? Is that something you're seeing?
[00:21:49] Speaker C: Yes, it is. You still got to usually put down 20%.
[00:21:53] Speaker A: Well, what is a state? What is a stated loan?
[00:21:56] Speaker C: It's where you state your income, but you don't prove your income. And the bank, as long as you have good credit and enough down on the property or equity in the property, if you're refinancing, they will forego the income part of it because they have enough security.
[00:22:18] Speaker A: Wow, interesting.
What group of potential home sellers makes up your typical reverse mortgage client?
[00:22:28] Speaker C: Great question. There's two. There is the, let's say a 70 plus year old. Now mind you, you can get a reverse mortgage of 58. But excuse me, usually my clients fit into two categories. The 70 plus year old who has a low mortgage doesn't want that payment anymore. Matter of fact, I just did one. They have a $4,000 a month mortgage and now they're going to have a zero a month mortgage payment. Right. They can stay in the home, they can take that extra 4000 a month and have quality of life along with the line of credit to do home improvements or pay off things or whatever they want to do. It's all quality of life. The second group are usually children that come to me and say, hey, mom's in her late eighties, mom's in her nineties and mom doesn't want to leave the house. And this is called costing us kids a lot of money every month. And we love mom, but what are our options? Well, let's make the mortgage go away. Let's give you a line of credit in order to pay for the help that mom needs to stay in the house and the quality of life the mom wants. And the kids are willing to go with the reverse mortgage product versus out of pocket because most families don't have enough to pay for two houses at the same time.
[00:23:53] Speaker A: So virtually the client is someone on the back nine of life, so to speak. Right?
[00:24:00] Speaker C: Like you and I.
[00:24:01] Speaker A: Not me yet. I'm not letting the old man in, but. So when does the mortgage get their money? So in essence, by not having a monthly payment, that monthly payment is paying down on the loan through a reduction in equity to make it simple. Is that correct? So when would that be? Let's just say mom and dad. Or let's just say you or me. We're in the home, we have a reverse mortgage. When would that transfer or when would that loan become due? And what is the downside of it?
[00:24:39] Speaker C: Well, if any, if mom or dad, let's, whoever becomes permanently incapacitated has to go to the hospital and is not ever going to come out at that point in time you would contact the lender. And there's many contingencies. The first one is 90 days, the second one is, I think six months. But each one's a little bit different. They're not going to push you, but they're going to say that you need to either sell the house or refinance finance it into a normal loan if mom or dad is not coming back. Now, if one of them is staying in the house, then the reverse mortgage.
[00:25:17] Speaker A: Stays forever until it runs out of equity.
[00:25:21] Speaker C: The second thing is if you decide to move, because it has to be for your primary residence.
[00:25:26] Speaker A: Gotcha.
What percentage. I mean, what percentage of loan to value is used for reverse mortgages?
[00:25:33] Speaker C: Mike, really tough question. So tough that there's actually specialized calculators for it.
I'm going to throw out the number 42, but it really depends on how old you are because it's based on an actuarial table on how many years they think you're going to live.
[00:25:56] Speaker A: Okay.
[00:25:57] Speaker C: So the older you are, the more money you get.
[00:26:00] Speaker A: Absolutely. I can hear that.
[00:26:01] Speaker C: I'll give you an example. Right now I'm in the process of doing one. They were both born, I think, 1955, so there are 70 and they're.
They have a $2 million house and they are getting close to 6600 grand.
[00:26:22] Speaker A: I gotcha. Wow. Always so informative when we have you on here. I walk away and say, hey, I didn't know that. You know, it's a wonderful thing to know. So what would you like to leave us with today as we close mister Goldstein?
[00:26:36] Speaker C: Buy property, pay off your loans.
[00:26:40] Speaker B: Yeah.
[00:26:41] Speaker C: Make me obsolete.
[00:26:43] Speaker A: You'd like that, huh? Yeah, I gotcha. I gotcha.
[00:26:47] Speaker C: But if you need good advice, please give me a call. I'm always here.
[00:26:51] Speaker A: There you go. And you can reach mister golston through us 925-32-2775 if you need a good real estate agent or a team, Nancy and I do a pretty decent job. We work with many, many great people like Mister Goldstein. Thank you for being on the show today, michael.
[00:27:09] Speaker C: Thank you, michael.
[00:27:10] Speaker A: You've been listening to the real estate and more show and I'm your host, Michael hatfield. Important topics like Bay area real estate, important people, and interesting people like mister Goldstein, listen to archived real estate and more shows on michaelhatfieldhomes.com radio. That's michaelhatfieldhomes.com radio. Or you can go after the show has aired to any of the major podcast platforms and hear the real estate and more show. Thank you for tuning in and I hope you tune in next week. And in the meantime, have a blessed day. Next week.
[00:27:46] Speaker B: 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 Re Max team have no liability for information to discussed on the show. Consult with qualified professionals prior to taking action.
