Dave:

Weren’t interest rates supposed to come down by now. Why haven’t they, will they this year? What loan products should investors be looking at? Today we’re talking about mortgage rates and loan products.

Hey everyone, it’s Dave Meyer and you’re listening to On the Market. And a couple months ago we had a very popular episode talking to three very experienced lenders, Caeli Ridge, Kenny Simpson, and Crystal Moore. And because this was so helpful to our audience in navigating the confusing lending market right now, we decided to bring them back on to discuss what’s going on in the lending world as we were about halfway through the year. And as a reminder, just to give you some context about why we’re doing this, again, many lenders and media outlets were predicting some rate relief by now at this point in the year, but we haven’t seen it. So we wanted to give you an update on what’s actually going on and dig into what this means for real estate investors. So let’s bring on our panel, Kenny, Krystle, Caeli, welcome back to the show. Thanks for being here again.

Caeli :

My pleasure. Good to see you. Thanks for having us. For

Dave:

Having us. All right, well Chaley, let’s start with you. Mortgage rates over the last couple of months, and we are recording this towards the end of May. Just for reference for everyone, have been on a little bit of a roller coaster up and down. So why don’t we just start by framing the situation currently for our audience. What are current average mortgage rates for a primary residence today?

Caeli :

So I checked this morning and remember everybody, there’s something called that LLPA. Dave, you and I have talked about this loan level price adjustment that will dictate what the actual rate is. So they’re not created equal like anything. So depending on loan size, credit score, property type, all of those variables. But I did get a baseline and let’s just say all things being equal, an owner occupied purchase with 25% down, you’re probably in the low to mid sixes this morning.

Dave:

Oh, okay. That’s better than I was expecting.

Caeli :

Primary residence.

Dave:

Primary residence. And how does that differ for an investment property?

Caeli :

So on average, right, again, all things being equal, you can usually estimate that the non-owner occupied or investment property is going to price about a 1% higher. So you’re in the low sevens to seven and a half, about a one point spread between owner occupied and non-owner occupied on the residential side.

Dave:

All right, well that’s tracking with what I’ve personally seen, so I’m glad to know that I’m about accurate. But Crystal, how does this compare to commercial rates? What are you seeing?

Krystle :

So commercial rates are really around mid sixes. It’s kind of the same scenario depending on the deal size and location pricing might vary slightly, but assuming a million dollar minimum loan amount, we’re pretty much 6.5 to 6.6 right now, which is why a lot of the two to four guys are trying to buy apartments right now

Kenny:

Because the interest rates are better.

Dave:

That does make a lot of sense. Well unfortunately for you all, those were the easy questions I had where you could just tell us what’s currently happening and now we have to go to what might happen in the future. So Kenny, let’s start with you. When you all were here previously, we were talking about what we thought might happen and generally the consensus, not just with you but in the broader economy was that rates were going to be coming down this year and maybe by now that obviously hasn’t happened so far this year. What do you think? Do you think we’ll see rate relief in 2024?

Kenny:

Well, I think we were all thinking back then, and I think we now know that there is a lot of money in the system and it just hasn’t got out. I mean we do know that Powell has a very tough job too. I think he wants to cut rates, but he is also does not want to do it prematurely, even though some of us would agree that maybe he should. But I think he’s very focused on the jobs, jobs, jobs, jobs. I think unfortunately he doesn’t want to come out and say it, but he wants to see people lose jobs, which would create probably some type of slow down and consumer spending more than there is now. And so until we probably see either some craziness happen or the consumer fall off a cliff or some pain in jobs, meaning probably over a 4% mark, I think we’re not going to get the cuts and we’re going to see rates kind of maintain the good news about rates, which I will say is the 10 year that the difference between the tenure and the 30 year fixed that spread was at 3.10, that’s actually come down to 2.60.

So actually the rates would be higher if it wasn’t for that. So we did get some relief. So I’m going to celebrate there a little bit just

Caeli :

To put into perspective guys. And Kenny, I’m sure he knows this too, but the jobs report in April actually was not as hot as maybe they expected. I think that I read that they were expecting 240,000, right Kenny in jobs and we actually only got 1 75. So big picture, that’s good news for us and the right department, but we need to see the trend.

Dave:

I just want to take a minute to explain a couple things that Kenny said there. First and foremost, when we’re talking about rates, we often look to the Fed and try and understand what they’re going to do because the federal funds rate, although it doesn’t directly control mortgage rates, plays a large role in the way that the bond markets work, which impacts mortgage rates. It pays a large role in mortgage-backed security markets and part of the whole global financial system that will eventually trickle down into mortgage rates. So that’s super important. But there is other parts of what sets mortgage rates and one of them is what’s known as the spread between 10 year bond yields and the average mortgage rate. And during normal times, the difference between a bond yield and mortgage rates is about 190 200 basis points, like 2% during the pandemic.

That shot up to about 3% as Kenny said. And that usually happens when either there’s excess supply of mortgage backed securities or there’s just more risk in the market. There’s all sorts of reasons, but it was excessively high. And as Kenny was saying, one of the reasons he’s celebrating is that’s starting to come down, which just shows that there are ways that mortgage rates move that aren’t related to the Fed. So it can’t, we can’t just look at the Fed when we’re trying to understand what’s happening. We have to look at bond yield, we have to look at the spread. So Kenny, thanks for bringing that up. It’s super important. I just want to make sure everyone understands that. Crystal, let’s move to you. Are you in agreement, you think we’ll have a little bit of rate relief or are you more optimistic?

Krystle :

I do think that we’ll have some rate relief as long as the trend continues. Of course, that’s why we’ve seen some reduction of treasuries in the last week or so. But definitely I think we’re seeing that credit card delinquencies are going up, the jobs numbers didn’t come in as good. Inflation came in slightly below expectations. So if we continue to have these reports going forward, then I do think that we’ll see rate relief. It might not be as much as we had hoped in the beginning of the year, but I do feel that we’ll see some relief for

Caeli :

Sure. And the feds are always good to tell us that there is a lag in this data, so there’s always going to be up to 90 days before some of the overwhelming evidence presents itself and the feds are making decisions. So I think we’re there too. I agree with Kenny and Crystal. I think we’re real close and it may take a couple months, but we’re close.

Kenny:

The other thing is rents are now becoming flat to negative. That growth, that growth stop, things like car insurance peaking, that’s not going to peak every year. So when you look at the inflation reports and the jobs report, you start breaking it apart and dissecting it, which a normal person’s not. You’re seeing pain. It just like you just said, we’re probably 90 days out to really start to see that effect. And if the trend continues, it’ll be good news for mortgage rates and investors and home buyers.

Dave:

Are you saying that I’m not a normal person, Kenny, because I start looking at that stuff every time?

Kenny:

No, you’re a nerd like me. Okay.

Dave:

Yeah, fair enough. Alright, well let’s move on and just talk about some trends that you all are seeing in terms of demand for mortgages and for loans. Chaley, you work a lot with investors and we just got through what is typically the busy season, high demand season. Did that normal seasonality present itself this year?

Caeli :

I don’t think to the degree that we normally see, but we definitely saw the trend upward. We saw an increase in applications and closings for the spring months the way we do, but I think that it was diminished a little bit to what we would typically see. So while there was an increase, it’s not as robust as maybe the last several years or what we come to expect.

Dave:

And Kenny, do you see the same thing?

Kenny:

What’s really out there? What I’m seeing, a lot of HELOCs, an overwhelming amount of HELOCs, which is unfortunately could spur inflation because people have spent their money, they tap the credit cards and now we’re on HELOCs. There’s a lot of equity. Interesting. I’m also seeing a lot of fix and flips. A lot of people are actually doing construction loans if they’re knocking stuff down here, they’re buying. And the other thing is a lot of non qm dscr, things like that. So because of these regional banks and all the issues, which will continue to problem because they’re going to have balance sheet issues, which Crystal can talk to you about on the commercial side. I think the non Q market’s going to, if as long as it remains healthy and fluid, that’s going to be a big help for a lot of investors that are going to need that product where they can’t get at a regional bank or a big bank.

Dave:

I’m surprised a little bit by the heloc. HELOC rates like 9% right now. I looked recently and they’re super high,

Kenny:

Right? I’m telling you there’s a lot of HELOCs going on a lot.

Caeli :

Just to add to that because one of the cool things about a HELOC or an open-ended revolving account that a lot of people aren’t necessarily as familiar with conceptually it’s interest only, right? The simple interest using it from a depository perspective and driving balances down and reducing the amount of interest that can accrue is a really effectual way that investors have been able to keep the lights on, I guess, or keep their cashflow as high as possible. So the regular person not knowing this, yes, I would agree with you that higher interest rate, there’s going to be some issues, but if they’re using it in a very specific way, velocity of money, they’re able to hedge and really keep up with the higher interest rate by not paying that extra interest.

Krystle :

You’re exactly right. And it’s also a much lower interest rate surprisingly than their credit cards.

Dave:

That’s a good point. If you’re using it for expenses or certain rehabs, then you should be comparing it to a credit card or a bridge loan instead of to a primary mortgage

Krystle :

And you only pay on what you draw. So that’s that other thing where we’ve used that too for investors who are maybe looking to buy a property and they haven’t quite identified that yet. The HELOC is a great way to do it because you only pay when you draw on those funds.

Caeli :

Yeah, I’m a fan.

Dave:

We do have to take a quick break to hear a word from our sponsors, but stay with us. We have more from Chaley, Kenny, and Crystal after this. Welcome back to on the market Crystal. I did want to turn to the commercial side because there’s been a lot of focus not just with real estate investors, it seems like the broader media has been very focused on lending and the state of commercial paper. Can you just tell us what you’re seeing here in the commercial side of things?

Krystle :

Yeah, I wish I had a rosy picture to paint, but lenders generally are much more selective on what deals they’re doing. I’m seeing lenders are controlling their volume, even though rates have come down over the last week or so, they’re still keeping spreads a little bit higher. And it’s mainly because there’s these kind of like this looming rules for banks to have increased reserves and so they’re really trying to beef up their balance sheet and they need some of these payoffs that were at three or three point a half percent to fall off their balance sheet. They’re also scaling way back on interest only right now. So interest only is much tougher to get right now because auditors are coming into the banks and telling them that they have too much interest only on their books and that they need to keep it within a certain ratio.

So I’m seeing a huge reduction in that across the board. But with investors, people are still trying to make deals work. So I see that most people are looking to buy deals where you can add 80. That is a big play right now. And even though I mentioned earlier that the two to four unit investors are trying to make the jump to commercial, what they’re seeing when they do that is that I’m telling them they have to put down 50, 60% on an apartment purchase. So then they go back to the other side to the two to four where they can add ADUs or play that game a little easier with way less down.

Dave:

Yeah, it’s easy to say look at commercial rates, they’re a little bit less. But then when you see the LTV requirements and how difficult it is to even find someone who’s willing to lend to you right now, it might not be as attractive I think as any experienced commercial operator might tell you. Yes. Just out of curiosity, crystal, you mentioned that auditors were cautioning banks against more interest only. I’ve never heard of that. Why would an auditor care about that or why are banks held to some specific ratio on interest only versus fully amortized loans or blue loans? Partially amortized

Krystle :

Primarily because of all the rollover. So when I talk to a couple of my banks, they’re anticipating 2025 to be a really big year, at least as far as refinances go. But the problem is is if you had your interest rate fixed, for example, I have one of mine that’s fixed at 3.1% with interest only for five years. If when I go to refinance my rate is 6.5%, I’m not going to be able to afford that mortgage. Now for me, I say we need interest only more than ever because of that reason. But auditors say that this is putting the banks in a bad position to possibly have non-performing loans. So they’re not going to, I don’t even know if they will loosen that even when the market improves. Again, I think that they’re finding that that’s problematic in their portfolios.

Caeli :

Crystal, does it have anything to do with the real estate prices, commercial valuation and where they think that may be? Because if they’re interest only, they’re not plunking down any principle. Is there any scare or any concern that values in that sector may be coming down, which might be a good thing for investors that right, you want to get in on the down and get out on the high, but do you think there’s any validity to that?

Krystle :

Oh absolutely. I mean, so if they can’t make their payment, they’re looking at a cash and refi, but they’re also looking at lower values and we are seeing that across the board here. So I’m seeing apartments are down 10 to 15% on values. Cap rates are still really low in comparison to interest rates, but I am seeing regularly 10 to 15% off or lower prices across the board. Finding comps is hard and I’ve recently just had my first appraisal come in low on a purchase.

Kenny:

The other thing just to jump in and Crystal could point on this, so when you have a commercial loan every year you have to send in your financials. And so Crystal needs to jump in on that because it’s very interesting, it’s happening there and then just letting their rate adjust and waiting. So those two things are big right now.

Krystle :

So if you have a commercial loan with any FDIC insured bank, they’re going to ask you for annual financials. They want your personal financial statement, your schedule real estate, your most recent tax return and current like the end of year p and l and a current rent role. So they’re essentially re-underwriting your deal every year to make sure that you’re meeting that one 20 debt service coverage. So what I’m seeing now is that if people aren’t meeting that the banks are having to work with them, they’re not necessarily saying you have to pay your loan down even though they could do that. I’m finding that more lenders are having to work with their clients on extending out their loans, doing some sort of a modification, especially if they’re performing, if the borrower’s making the payment, they’re just extending the loan or making exceptions, but they’re definitely seeing that their numbers are coming in below that 1.2 or 1.25 depending on the lender debt service. So the auditors are seeing those numbers.

Dave:

Interesting. So let me just explain that to people who may not be familiar with commercial loans. All commercial loans are underwritten on the strength of the asset and the deal that you’re putting together. It’s not based on your personal credit worthiness. If you are buying a primary residence or a residential property where they look at you, your credit score, assess how likely you are as a person to repay your loan, commercial loans are basically all math. They say, Hey, how much cashflow is this property going to generate relative to the debt service? Just how much they’re going to have to pay for their loan every single month. And there’s a ratio that they use, it’s called the debt service coverage ratio and basically how much, what ratio of cashflow or revenue there is to the debt service. And most of them want that ratio to be at 1.2 or 1.25% as Crystal just said. And from my understanding, normally they just underwrite that at the beginning and then as long as their people are paying, the banks were kind of just like, yeah, it’s fine. But now they’re actually reassessing that every year to make sure that that debt service coverage ratio is still holding up to their underwriting standards.

Krystle :

So it was always required, but lenders were just kind of ignoring it and not really doing it. And then after the great financial crisis, they started writing in the loan docs that you would essentially trigger the default rate if you didn’t turn in your annual financials because auditors were dinging the banks, they were basically reprimanding the banks if they didn’t have that up to date information. So I have seen it happen with clients where they go into the default rate a few times, so it’s not something you can ignore any longer.

Dave:

Wow, okay. But it sounds like if you’re performing, if you’re still paying your mortgage, even if you drop below that 1.2, most banks are going to work with you and find a solution.

Krystle :

Yes. And there are some things like sometimes you’re renovating and so you’re below 1.2, so they might put you on a watch list and check in with you a few months. They’ll get all the details on the renovation, how long you think it’s going to take, basically a plan to cure this issue, and then they put you on the watch list and then you can kind of fall off after that. That’s most lenders. I will say I don’t think lenders want properties right now, so that’s the good thing. I know some people might be suspicious that banks might loan to own, they have no interest in owning your property. They essentially want to work with you to continue to operate the asset. They just want you to make your mortgage payment. That’s it.

Dave:

Yes. The banks not typically in the business of owning property, and they would much rather you just pay as agreed. Yeah. So let’s move back to the residential side. Kenny, I’m curious, you mentioned HELOCs becoming more popular. Are there any other trends that you’re noticing in the residential space that you think our audience should know about?

Kenny:

Well, the big thing right now in California is a DU play. A couple things. Number 1, 2, 3 years ago, the problem was people didn’t understand it. Appraisers weren’t being nice with the appraisals, and now that’s becoming popular. The reason why I say that is people are coming to me, they’re buying a two unit and then they can get a fix and flip loan to actually add the A DU. So that’s very popular here. Then they’re going to take it out. That’s number one. I would say the stuff that’s really working now for people, like I mentioned as a non QM market, is really strong pricing’s actually very competitive relative to conventional financing. How’s that helping a lot of people? Number one, maybe your wife’s W2 and your bank statements and that’s how you qualify. Maybe your just bank statements, maybe you are just doing DSCR, like you mentioned where you use the property, the income from the property, they look at your credit, your down payment, and they underwrite a loan like that.

HELOCs are obviously popular for owner occupied and investment properties. So both I’m seeing on both if you have the equity, what else is really going on? A lot of bridge loans. So a lot of people are doing bridge loans and to get a property up and then we’re starting to see I did a, which is unusual, a bridge. So a 10 31 bridge, and then we’re doing the other property. So if that person is not ready to sell that property, we’ll bridge it. They’ll buy the new property and they can sell later and verse into it. Because obviously as a lot of us know, if you’re in a competitive market and you don’t have your cash ready, it’s really hard to close on a transaction quickly so that way you don’t have to have, well, I want to buy this property, but I have to wait contingent on this to sell. So those are the trends I’m seeing. But I would say non QM is very popular in helping a lot of people with a lot of scenarios these days.

Dave:

We have to take one final break, but we have so much more on mortgage activity and products investors should look at after the break stick around.

Welcome back to the show. Let’s jump back in. Well, I want to dig into it. The first thing you mentioned, Kenny, which was the A DU play. First of all, A DU stands for accessory dwelling unit. A lot of cities, particularly on the west coast, are doing what’s called upzoning, which means that you are allowed to build accessory dwelling units. It’s like a mother-in-Law Suite or an apartment above a garage, something like that, tiny home in your backyard. And this is seen as widely beneficial. I think most people agree this is a good idea. An opportunity adds a housing supply and for investors it’s a great idea. You could add additional cashflow to your property by building an accessory dwelling unit. So Kenny, can you just explain to our audience how lending works on an A DU property? Because I understand that it’s changed a little bit as of late and it might not be as straightforward as just buying, for example, a duplex.

Kenny:

Absolutely. So let’s take a step back. Two, three years ago, Fannie Mae didn’t have a ruling on it. Then they had a ruling on it, they didn’t like it, and then they finally came out and said, okay, Fannie Mae’s guidelines are if you have a single family and you have 180 U we’re good. And Freddie Mac was okay, if you have a two unit add one A U, well, we run into problems and somebody has two units and they add two Aus or they have a house and they add two ADUs or an A DU and a junior, a DU. A lot of ADUs going on here. So a couple of things. Number one is we actually a lot of times will just appraise a property as a three unit and they come in and we get it done that way with no mention, I’m in a DU to be honest, but if you have to do the A DU play, what the problem was years ago is we didn’t have comps.

So where’s the, we don’t have a comp now. There’s a lot of comps. So if some of these cities are up and coming, you’re lying ’em. What you’re going to run initially is where’s a comp? I don’t have any comps. Underwriters might come back and say, this is great, but I want to see comps. So that’s one of the issues. You can run into non qm if you do have a two unit and another two unit and for some reason you can’t go traditional, you can go ahead and do non qm. They’re okay with the ADUs and non-conforming if you want to say. But eventually I think Fannie Mae just needs to get their heads and arm dropped around it and say an A DU is a unit and just call it what it is and just whether it’s one unit, two units, whatever, and allow it. I think we’re getting there, but they’re here now. It’s just maybe going to take a few more years, but I don’t see why they’re just not doing them. Just calling them units.

Krystle :

I mean they’re approved, they have plans, permits, everything.

Kenny:

Yeah, it’s kind of crazy.

Caeli :

Well, and Kenny and ground up construction is part of that too, if they needed it, right? If it’s not just a refinance or if it’s an existing dwelling, they can look at ground up construction and add the extra unit and the city is offering tax incentive for a lot of those. Is that still right? Did I get that right? In California specifically, you

Kenny:

Can get a little bit of money, they’ll give you $40,000, but what do you get for $40,000 In California? Not much. You might get a kitchen or a bathroom, but what’s happening is if somebody will buy a property there maybe is in a garage, they want to convert or there’s already an illegal unit. So they’ll do a fix and flip loan, they’ll go get the plans of permits quickly and then, which is getting faster here, and they’ll go and use that money in the budget and they’ll start fixing that up and then they’ll take it out with long-term debt or they’ll sell the property. So those do work here. The good news is it’s getting much faster to get a DU plans here, maybe six months or less. And it used to be like a year or more is ridiculous. So that model of waiting around and paying 10% on money was painful.

Krystle :

I mean, we’re seeing people adding, I have clients calling me adding 10 a 14 adu, the number of are crazy. Yeah, they’re just looking for any lot with a big lot with a smaller building and they’re just stacking as many adu and they’re also in order to get more ADUs doing a couple of affordable units to maximize.

Kenny:

And then Dave, lastly on that, which Washington’s already due, Seattle is California had passed. They haven’t implemented, but they’re going to start allowing, if you built 14 Aus to sell them individually, it’s passed. It just has not accepted it or put it into play like in San Diego doing it in Washington. And I actually talked to one of my lenders and we talked somebody up there and Fannie and Freddie Lin on them. I haven’t had an experience to do one yet, but that is coming down the pipeline here in California.

Dave:

Wow. Well, I definitely going to be a strong incentive for developers. So if you are a developer, you probably want to look out for that one. Chaley, I’m curious as we get close to wrapping up here for our audience, and if we’re all correct here that rates are probably going to stay a bit higher than some people were hoping for or expecting, do you have any advice on how think strategically about loans in this type of higher interest rate environment?

Caeli :

So what I’m seeing for the cashflow, for those that are really looking for the highest value in cashflow, which by the way gang, there’s going to be market cycles where cashflow may be diminished a little bit and you’re really focusing a little bit more on the appreciation. So I would say ride that wave if you can because it’ll come back around. But one of the more unique things that I’ve been seeing lately is midterm rentals and check this out, this is really cool. In the states in which you’ve got all the major professional sports teams, they are signing leases for two and three years in advance. What’s happening is these kids are signing the roster, right? They’ve got their rookie contract for two or three years. So you’ve got your football, your basketball, your baseball and your hockey, right? The four majors. So finding properties in those states, usually on the higher end, these kids are, I mean, what are they making?

Minimum 400 grand just to be on the roster in many cases for a professional athlete. So they are coming from out of state, they don’t usually live in the state in which the property is located. So they’re coming from out of state, and again, they’re signing a lease for three years in advance because they want to go back to the same place. And because the actual sports themselves are in those chunks of time throughout the year, they’re vacating and then the next sport starts and the kids come in and rent. So it’s a unique idea, and I think it’s doing well in certain markets and the cashflow seems to be covering what just maybe a single family is lacking right now.

Dave:

Yeah, I’ve never done midterm rentals, but people seem to like ’em and think that they’re good for cashflow, and that’s a very interesting angle. Do you know how people could target that demand from those athletes or similar types of ideas in particular? There

Caeli :

Are turnkeys out there that are actually focused just on this right now. Agents that have adopted some of this. Ohio is one of those states. That’s the first place that I heard about it, but I can’t imagine it would be all that difficult. There’s probably easy access out there for you to ingratiate yourself into that space. I can’t imagine it would be all that hard. If you want to get the information, you could probably find it pretty easy.

Dave:

Crystal, let’s go to you. Any last advice for our audience here about thinking strategically about using debt in this kind of market?

Krystle :

Yeah, I mean, the one thing that I’ve noticed is a lot of owners have not really focused on maximizing the potential of their properties. So now, like you mentioned Shaylee, you might be seeing reduced cashflow right now, and that’s just a period of time before we get back focused on that. For us, it’s more like work on maximizing your cashflow. If there’s things that you can do to your property, if you can add storage, if you can upgrade units to get higher rent, this is the time to do that. If you’re not finding that much in the way of investments, I know a lot of clients here are getting a little bit restless. They want to find a deal, they want to buy something. Everybody’s complaining that it doesn’t make sense. For one, it’s kind of like that needle in a haystack. There’s always a deal somewhere to be had, so you’ve just got to be more patient than ever.

But I would say if you’ve got the cashflow now or you’ve got some cash, I would focus on maximizing your properties because a lot of us have been so busy the last few years that maybe we renovated 70% of our property, but there’s that last 30% that’s out there hanging. And then the other thing that I’ve been having a lot of conversations with people about is that their loans are adjusting and what do they do? Should I refinance? Now, if you have a commercial loan, you really want to check your loan docs or call your loan officer or banker and see what happens after that fixed period when the loan adjusts. Hopefully it doesn’t balloon, but a lot of lenders don’t have a cap on the first adjustment, so people need to be aware of that. So if you have a three and a half percent rate, your rate could jump up to seven and a half or so because there’s no 1% cap on that first adjustment. So you really want to check that out. And I really am telling people this is a balancing act. You probably want to wait to see if it makes more sense to wait to refi, because on commercial, you’re locked in, you’ve got prepays to deal with and all that kind of stuff. So it’s a little bit of a balancing act where I’m just staying in touch with a lot of clients to see when it makes the most sense for them to refi.

Dave:

Got it. Thank you. Kenny, last to you. Any last advice for our audience?

Kenny:

Yeah, a couple things. I’m saying number one is make sure you’re really working with a good team right now. Experience really, really matters. Not all lenders are created equal. Not all loan officers are created equal, right? And experience is really going to help you really need lenders right now as people go, how are you so busy? I said, because we’re solving problems and because we have relationships with banks and CEOs and chief credit officers, we’ve had a long time. So to get that exception and go through also on non qm, what a lot of people don’t understand is not all lenders are the same. Not all lenders sell to the secondary market. Some of them actually can balance sheet the product. So that means they can be more flexible. We can get exceptions done. So you have to understand that when you’re talking toll, a lot of loan officers don’t know that.

They think everybody just sells it. They don’t have to. And then last but not least is if you’re buying an investment property or a primary, a lot of times you’re competing with cash offers, right? You’re competing with closing quickly. So get your docs in. Maybe you have to do the pre-underwrite upfront, get your deal vetted. And a lot of people are going into escrow with their deal not vetted. And look, when I say vetted, that doesn’t mean, Hey, I’ve got a tough deal. Let me go call the rep at the lender. That means I call the head underwriter and that head underwriter calls the investor, and that investor says yes. So when I submit the file, I don’t get blown up in two weeks to tell me you can’t do the loan. I go straight to the source that’s buying it or makes the decisions. And then I come back and I said, Hey, I’d rather take 2, 3, 4 days to get a slow yes than a no in two weeks. Then it makes me look bad. The buyer, the agent, everybody. So just make sure you do your homework and you work with the best, and those people really have confidence in what they’re delivering.

Dave:

Great advice from all of you, Kenny, crystal Chaley, thank you so much for joining us. If anyone listening wants to connect with one of these three, we will put their contact information in the show notes and description below. Thanks again everyone. Thanks

Kenny:

Dave. Thank you. Thanks Dave.

Dave:

Thanks again to everyone for joining us. I just wanted to reiterate one last thing before we go, which is, as Katie said, right now, it is really important to work with an experience lender. Things are changing really rapidly. Mortgage rates are going up and down. We’re sort of on this rollercoaster, and a lot of banks are adding new products to try and account for that. There’s a lot of new legislation going on with the lending industry, and so you do need to stay on top of things. Of course, listening to this podcast, we’re going to try and give you that information as much as we can. But working with a great lender, as Kenny said, is another way to do that. And if you want to connect with one for free, we have a tool for you at BiggerPockets, just go to biggerpockets.com/lender and connect today. And for anyone who wants to connect with an investor friendly agent, go to biggerpockets.com/lender Finder and you can get matched with one completely for free. Thank you all so much for listening. Hope you enjoyed the show, and we’ll see you soon for another episode of On The Market. On The Market was created by me, Dave Meyer and Kaylin Bennett. The show is produced by Kaylin Bennett, with editing by Exodus Media. Copywriting is by Calico content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.