Vetted VA Live: Understanding the Loan Estimate
[00:00:00] Josh Lewis: Welcome to the inaugural episode here of vetted VA alive. We’re tentatively scheduled here to come. Every Tuesday you guys are used to in the Facebook chat. Being able to answer, ask your questions and get those answered. What we wanted to do is be able to give you a video them to step in and have them answer live where the vetted VA experts can go into a little bit more detail on that.
[00:00:23] Josh Lewis: So hopefully this is something that you can look forward to going forward. My name’s Josh Lewis, I’ll be the host. We’re going to be joined obviously by three experts here in the vetted forum. Let’s start with, Nathan, Nathan is the right hand man of Chris Griffith who started vetted VA as the chief operating officer of vetted VA.
[00:00:44] Josh Lewis: Nathan, just so everyone can understand here odd people show up and they know intuitively, Hey, I can ask questions in text format. I can get answers in terms of get video answers, but maybe you can walk through what it takes for a professional to get. How they’re assigned to squads and how the squads manage the moderation and answering and handling all the questions.
[00:01:05] Nathan Knottingham: I’d be happy to try. I appreciate that, man. All right. So Veta VA if you go in there, we’ve tagged a couple of posts up there. Christopher’s answered this and kind of work through these, but the professionals that joined vet VA do something very unique in our world of mortgage lending and residential finance and real estate.
[00:01:24] Nathan Knottingham: And we have real estate professionals as well. And that is, they said they elected and said, we actually want to learn more and we want to be held accountable, independent business owners and business people. Not everybody works for the same company. Brendan McKay has became mortgage in Maryland.
[00:01:41] Nathan Knottingham: Matt Birkhead is a leader in Nexa and he’s based in Arizona. Matt Chandler and Josh you’re over there in California is like a they, elect to be a part of this, group. So partly it’s willing hearts and minds. That’s all we’re looking for people that are like, Hey, we understand that we want to be better.
[00:02:00] Nathan Knottingham: We want to change the industry to prove that the veteran, the active duty member of the service member of the spouses should be taken care of from the very get go. They shouldn’t be sold something just because of a brand. And so the individual vetting is the key component there. Now, what does vetting specifically, like what does that look like?
[00:02:17] Nathan Knottingham: There’s the accountability piece, but then there’s the training and we built up a rigorous test that literally takes the VA lender handbook, 26 dash seven. We broke it into 300 questions. We broke it into six tests of 50 questions each, and we test them with an open book test that has a failure rate of roughly 70%.
[00:02:38] Nathan Knottingham: It’s not fail and you’re done. It’s fail and pick yourself up and test again and test again until you get all the way through to 90% passing rate on average are professionals in here. If they’re in a VVA three and they’re moderating and they have a, you see them on the map on better va.com, they’ve been through roughly 12 hours of testing, just to know that handbook inside and out, they hired then really reporting on themselves with hum to data, but more information how the data is actually a home mortgage disclosure act.
[00:03:05] Nathan Knottingham: And it is a requirement that every quarter, a mortgage professionals report on the information that the loans they’ve done, the loans they haven’t done and the CFPB. And then that’s used to help make sure that people are being compliant. We, raised that bar and said that it takes too long for us to get that data.
[00:03:24] Nathan Knottingham: And we asked all the professionals reported themselves monthly and submit a veteran, tangible benefit form something we coined and wanted to move forward with. VTB because by doing that, we can actually look faster and give coaching and accountability to say, Hey Brendan, I’m gonna pick on you like Brennan you’re lying against Maryland.
[00:03:43] Nathan Knottingham: Here’s you know, here’s where you were. Here’s where maybe Maryland VA lending it was, are you better? Are you serving better? Can you be sharper? How does this work? We don’t tell you what to do, but we provide insights and valuations so that you’re like, oh, I see what’s going on here. Now in the group, this is the crazy part, right?
[00:04:00] Nathan Knottingham: It’s one thing to learn something. It’s the other thing to actually do it. Repetition is a key component to that. If you’re going to be really good at something, you need to have a lot of at-bats. You need to have a lot of practice, a lot of time doing it. I think Gladwell wrote the 10,000 hour rule and, others have talked about that grit Sorry, I’ve just got sidetracked because I can’t remember her name the author of grit.
[00:04:20] Nathan Knottingham: It was a great book. And so you, what does that mean? Repetition and opportunities moderating. So they come into this group and they’re, giving their time they’re broken into eight squads. I pretty clearly upfront usually say this. I did not serve. So I’m that guy that went to college instead.
[00:04:39] Nathan Knottingham: My dad’s no, I served, I want you to go to college. Please do that son. And I was like, all right, dad, I’ll go. I’ll go to college. And so I didn’t serve, so I learned a lot of this by working with Christopher who is the Marine veteran. And he has Hey, look, it’s not broken and Marines, do it a certain way.
[00:04:53] Nathan Knottingham: So let’s do squats. So we broke it all, the professionals into eight squads, every squad has watched today’s Delta squad. Every squad has roughly 14 to 15 members. They’re broken into fire teams and they’re on track. They’re watching, which is why when a pending post gets approved. Moderator is usually the first one who has a detailed communication piece for that post asking the question and they’re challenged to site and source their information and to provide you the VA home loan beneficiary, or the, veteran, the active duty, the spouse with the information that you need to go to, whomever you choose to work with whomever, wherever to go with the information that allows you to be your own best advocate and ask intelligent, right questions of the professionals you’re working with.
[00:05:41] Nathan Knottingham: Like I’ve mentioned, we have realtors, we have mortgage professionals we’re working on with possibly some insurance people soon, and it’s always just to serve. We are a human source of intelligence, IE, a human source of FAQ’s. And after almost three years, it’s remarkable how far it’s gone and how far.
[00:05:59] Josh Lewis: Absolutely. And you and Nathan, you had mentioned the, testing component, the education and testing that’s rigorous, but I don’t know how these guys feel, but even the moderation training it sounds simple of moderating a Facebook group approve and disprove posts, disapprove post ask questions, but we do have some, rules in the group.
[00:06:18] Josh Lewis: Don’t say anything. Don’t say anything that Christopher’s mother doesn’t want to hear out of her ears. So that’s a big one. And there are other things that maybe the members don’t always understand, but there’s a reasoning and rationale for it. So as moderators, we have to learn that piece of it to make sure conversations don’t go off the rails.
[00:06:35] Josh Lewis: People are getting their questions answered and, moving forward. So it’s, been an interesting
[00:06:42] Nathan Knottingham: process. Mimi grandma Christopher’s grandma Mimi. She was one of the first ones that was brought in and it was like, look, no cussing, right? Cussing is an emotional response to something. And either you either do it too to get an emotional of somebody or you do it because you’re feeling emotional and you just have to put it out there and.
[00:07:00] Nathan Knottingham: And sometimes that just, that doesn’t get us to what we need. So we put a no cussing rule on this group and it is the most PG, I dare say G rated veteran group you’ve ever seen in your entire life because we are focused on one, one thing. And one thing, only home ownership and finance and no cursing.
[00:07:18] Nathan Knottingham: And then the, solicitation, that’s really not for the veterans as much as it is for the professionals. What did good does it do? If you’re like, Hey, can I find somebody to help me? I’m in Maryland. And all of a sudden you get like ping, and DMS everywhere. Hey call this person, I’m here. Call me. How do you choose that? When really what your question is I’m in Maryland, I’m driving a house and I don’t understand how the escrows work for this. That’s what you really are trying to get to you. Just, I don’t know how to ask that question. So I’m going to say, does anybody have a professional?
[00:07:50] Nathan Knottingham: So we, drive to the question, what is the root cause? What is the core of your question that you need to get to? Yeah, there are a couple of rules and we’re really sure to them. We hold them very broadly cursing with emojis by having people get angry with us about that too. And I get it, but it’s a rule we’re going to do it.
[00:08:06] Nathan Knottingham: Keep Facebook offers.
[00:08:07] Josh Lewis: And Nathan, in addition to just saying to the professionals in the group, no solicitation on a squad day, what do we have? 10, 12 people in a squad. And the chances are the person, the way our approvals go. And we’re approved state by state. And a lot of us are approved in multiple states.
[00:08:24] Josh Lewis: Some aren’t, I’m not, but a lot are, but the chances are the person asking your question. Couldn’t do your loan if they want it to. So there’s no incentive other than to educate you and get you pointed in the right direction. And a lot of times you’ll see that it’s, Hey, the person you’re working with, maybe just isn’t familiar with the VA guidelines, here’s the guideline site and source, let them see what it is.
[00:08:44] Josh Lewis: And if they still can’t help you, there’s definitely experts here in the group that can, but a lot of times that’s enough to get the lender back on track and keep things
[00:08:51] Nathan Knottingham: moving forward. And sometimes that’s why, if somebody were like, why’d you put the map up there? When we first started the group and people want to, who can I work with?
[00:08:59] Nathan Knottingham: We’ve earned some trust, where do we go? We created a map because the map shows you that we are working with these individuals. They’re holding themselves accountable. They are accountable to us, are accountable to you. They’re accountable to feedback, they’re presenting information and data. So we can, double-check a backstop against what they say they’re doing is actually what’s happening.
[00:09:16] Nathan Knottingham: And so if you reach out to somebody off the Veta va.com, because that’s, then you have two chances, right? One, you see them on a map, you could contact them to look them up in the group. See how the answers to the questions. Are they teachers, or are they tellers? Who do you want to work with? How does that look?
[00:09:30] Nathan Knottingham: So that was, that’s why I’m excited about doing these types of lives in the evening. So we can engage some stuff in real time and really dive into some, cool details that I think people need to know. And I’m hoping the audiences will start picking up and asking the questions. I’m gonna keep my eyes over here.
[00:09:48] Nathan Knottingham: And as we move forward I’ll be throwing these up and interrupting Matt and Brendan and, you Josh soon.
[00:09:55] Josh Lewis: So, with that, now that everyone understands the squad structure, they know that today is Delta squad is on duty. These are two of the leaders from Delta squad. Both of them have the VVA five rank, the highest rank.
[00:10:07] Josh Lewis: Does that sort of mean they’re the greatest loan officer? It means they’ve they, are really good loan officers and they’ve put in a lot of time, effort, energy, and commitment to the group and work their way up. I think both of these guys have been around since almost the very beginning, if not the absolute, very beginning of vetted VA and have been deeply involved and are heavily committed to the cause.
[00:10:26] Josh Lewis: So with that you would already introduced both of them, but Matt Burkhead he’s in Chandler, Arizona works for Nexa mortgage. And Matt, you are a veteran, is that correct?
[00:10:35] Matt Burkhead: Yeah, correct. So I did four years in.
[00:10:38] Josh Lewis: So thank you for your service and for the service to the veterans here inside of this group, Brendan you’re on the other coast over there in Maryland, a little colder for you than us.
[00:10:48] Josh Lewis: Not only is Brendan VVA five. He was also recently named the 49th top producing mortgage broker in the United States, a big big honor for him and his company. He has a really strong and solid team. Brendan w we talk regularly about different things, he’s doing in his business and, he and his team have been an invaluable resource to what we’re building here, not just to the, vetted VA community.
[00:11:14] Josh Lewis: So today what we wanted to start with, we get a lot of questions from you guys about the loan estimate. It can be a daunting document. So we wanted to just roll through all three pages. Tell you what you should be looking for. What’s important to get these guys feedback and if you have any questions by all means Nathan, we’ll throw up a banner here just to remind you, if you have questions, throw them up in the comment section, we’ll be happy to go through them.
[00:11:42] Josh Lewis: You want to throw up the slide deck, Nathan, we can start there. So, the loan estimate is broken up into three pages. We’re going to have five different slides here, cause there’s a lot of information. So this is the top of page one. Brendan, did you or Matt, did you want to start rolling, through page one of their what, we’re seeing here and what’s important to the bar and I think we’re actually we’re one slide.
[00:12:06] Josh Lewis: Yep. There we go. Top of page one.
[00:12:08] Matt Burkhead: So this one goes over the general parameters of the loan. So you’ll see in the upper right. The loan term. So in this case, it’s a 30 year. You’ll see that it’s a purchase fixed rate and then what type of loan. So this one is a conventional loan, and then one of the important pieces is the rate lock, right?
[00:12:28] Matt Burkhead: Whether it’s locked or not locked. So this one is locked, meaning that these numbers are all set, right? They’re not going to change if the box no was checked, then you know, the rate can change. It’ll fluctuate with the market, right? If you go up, go down. So the numbers are solid, right? And then you’ll have the different loan terms.
[00:12:48] Matt Burkhead: So the loan amount, the interest rate, and then the principal enter payment. This payment doesn’t include your taxes and insurance. Likely your total payment every month is going to be more than what’s just
[00:13:02] Josh Lewis: on here. And with, the VA loans, she always here, we have to disclose whether there’s a prepayment penalty, never going to have one with the VA loan balloon payment.
[00:13:10] Josh Lewis: We’re never going to have that either. So those are pretty basic. And then we moved to the bottom of the page. It starts giving you some more info from. And
[00:13:18] Matt Burkhead: then it’ll break down the principal interests. So this one has years, one to seven, and then years eight to 30. Typically with VA loans, it’s just going to be one to 30.
[00:13:30] Matt Burkhead: Because VA loans don’t have the mortgage insurance that you’re seeing here on the years, one to seven. And then below that it’ll have what your estimated tax and insurance in any HOA fees are. And then they’ll see to the right, it says in escrow or not. So the HOA is going to be included in this total monthly payment down there, but for HOA fees, those are not included in the mortgage payment.
[00:13:55] Matt Burkhead: And so you’ll see HOA fees. No, not in escrow, like your taxes insurance typically are with VA loans. And then below that, you’ll see the breakdown of. Closing costs as well as the cash to close. Now they’re closing costs with VA loans could include a funding fee, but the funding fee is financed in.
[00:14:16] Matt Burkhead: So the closing costs might seem like a big, scary number, but that’s not the actual cash to close. That’s below it. So the closing costs are the total fees on the loan. And then below in the cash to close is what someone would actually bring to closing.
[00:14:35] Brendan McKay: The only thing I’d add to that is like also on this is oftentimes the first time the, home buyer is going to see everything lumped together, oftentimes before they were looking at what’s called a fee worksheet where everything’s broken out and they see the lump sum of closing costs for one time.
[00:14:50] Brendan McKay: And it can be a little dry. And as Matt said that the funding piece included in it, but the tax and insurance escrows are also included in it. I think frankly, it’s a little poorly designed, cause those are not closing costs. You can be buying the home in cash and you would still have taxes and insurance on there.
[00:15:07] Brendan McKay: So it is literally all a bit lumped together. I think it’s poorly worded, but it’s what we have to work with. So don’t freak out. If you see that big number there don’t, just let it slide either. Make sure that it all adds up though. Before you lose your mind now. Yeah. With
[00:15:21] Josh Lewis: that let’s, roll over there.
[00:15:23] Josh Lewis: Well, Nathan page two is going to give us that breakdown where you start
[00:15:26] Nathan Knottingham: seeing it. We are going to see that, but actually I don’t want to miss this. Like we got our first question, right? So the first question was at what point during the CMP claim, can the VA funding fee be exempted?
[00:15:39] Brendan McKay: I can happy to take this one or it Matt.
[00:15:42] Brendan McKay: Matt, why don’t you take it out?
[00:15:44] Matt Burkhead: So from my speaking with the VA regional loan center there’s basically two different ones. So when you’re being med boarded, it can be exempted prior to you discharging because when it’s a med board, you actually get a rating prior to actually being discharged. And so you would take the paperwork from the med board with the rating, you would either give it to your loan officer and then they can submit it to the VA portal and they will manually exempt you from the funding fee on your certificate of eligibility.
[00:16:18] Brendan McKay: Yeah. The only thing I’d add to it is if you are starting your application process after you separated it’s, going to take some time until, your rating is approved. And if you close on a mortgage during that time the funding fee will be collected at closing. But once your disability rating is granted, you can go back to the regional loan center.
[00:16:42] Brendan McKay: And if any of this, you’re not sure how to do it, comes to the veteran VA and we’ll help guide you through it. And at that point show that you had formally applied for your disability rating before closing, you were just in the in-between period and you will get your funding fee refunded back to you at that point.
[00:16:56] Josh Lewis: And Brenda, and that, timing is important, right? If they didn’t start their claim and you start the application and then they put their, claim in, even when it’s later approved, they’re not getting, and it’s a lot of money. And we say the nationwide, the average is what 3 85. Now 2.1% funding fee is seven or $8,000.
[00:17:15] Josh Lewis: It’s a nice chunk of money that if you are entitled to get it returned you, want to make sure you have that in process prior to, starting your. Yep.
[00:17:25] Nathan Knottingham: Absolutely. All right. Nice work. We’ll move on.
[00:17:28] Josh Lewis: So the important part is anyone else have any questions? That’s what we’re here for this discussion, but pop up anything you guys have, you can see these guys have answers for you.
[00:17:37] Josh Lewis: So w where we go, there is page two. Page two is a little different where we have top and bottom rolling through the information. Page two is two columns and the left side, what Brendan was hinting at before is really your closing costs and the right side are the other things like escrows in interest, that type of stuff.
[00:17:54] Josh Lewis: But with that, Brendan, you want to talk us through the left column and the closing costs.
[00:17:58] Brendan McKay: Yeah, sure. So I think this is honestly probably the most critical part of the loan estimate and in particular box bay we’re, going to explain what the other fees are, but a lot of them are boiler plate title insurance and appraisal fees are fairly standardized and some of them are pretty heavy regulated.
[00:18:15] Brendan McKay: So it’s not really a spot you’re often going to get overcharged, or if you are, it’s not gonna be. We’re talking about a couple hundred bucks or something like that, where in box a and in the origination charges, you can see bass variations. And this is the most when you’re shopping, lenders are shopping loan officers.
[00:18:33] Brendan McKay: You want to look at the interest rate and you want to look at box a, if you’re talking about a VA loan and that’s really going to tell you the truth of the matter, because if you see one lender with, an interest rate and no fees in box a and another one with a lower rate, but a ton of these in box say you are not comparing apples to apples at that point.
[00:18:52] Brendan McKay: So you can’t just look at the interest rate to tell you the whole story. You want to look at those fees in box a and in that situation I just described, I’d recommend going back to the lender who maybe had the higher rate, but lower fees saying, Hey can you show me your comparable interest rate?
[00:19:05] Brendan McKay: And they might be able to do that same rate and lower fees. You don’t necessarily want to do that. That might not be the smartest thing for you to do, but you now know who, who has the better terms and, you’re going about it more intelligent. So you can see things like discount points up there they are and how to discount.
[00:19:19] Brendan McKay: They are very much a cost application fee, underwriting fee processing through your typical things that you’ll see up there. Sometimes you’ll see your originator compensation up there as well. All things that you want to keep in mind box B is you’re working. You’re going to see standard standardized fee.
[00:19:37] Brendan McKay: Sometimes there’s a little variation, lender, fees and box fee, but it’s minor stuff we’re talking about, like a flood cert for 35 bucks or whatever. Nothing that’s going to make or break it. Appraisal fee is something that’s going to be standardized and charged by the VA. So you don’t have to worry about that shopping from one lender to another.
[00:19:54] Brendan McKay: And then in C it’s services you can shop for that being said, there are some limitations really in your ability to shop at like title insurance yet it’s something you can shop for. There’s really only five or six companies in the country that provide title one. And they all have the same price, unfortunately.
[00:20:11] Brendan McKay: So you’re not going to see a ton of swings there or anything like that. So those are more standardized fees. Not that they’re not significant. You can see some of them are going to be higher, but also you, if you look at one of these and you say my whatever the loan amount was, doesn’t line up with.
[00:20:26] Brendan McKay: That it’s not that relevant that these fees are going to vary wildly from one region to another one state to another one county to another. So, don’t worry if you’re a little higher or lower than this. You are going to see a lot of variation in that.
[00:20:40] Josh Lewis: Brendan, a couple of questions that I have, and I think a lot of the viewers here would have as well in box a, I had a client reach out to me yesterday and he tells me they’re really one of the second opinion on the numbers.
[00:20:50] Josh Lewis: And it turns out the numbers you were getting were not bad, but he gives me a number and he says, I’m paying $1,500 in points. And it was an amazing interest rate. And then he said, okay, tell me what. And we go through it and in box a, there was $1,500 in discount points. There was 4,000 and change in origination fee.
[00:21:08] Josh Lewis: And then on top of that, there was an 11, $1,200 underwriting fee. So one of the things that I tell my clients is I don’t care what anyone calls these fees in box, a add them all up. And that’s what you’re paying for your interest rate for us, the way we do it. I don’t know how you guys do it. We generally the underwriting, the admin fee, everything is included in the cost of the rate.
[00:21:29] Josh Lewis: So if there’s any cost for it, you’re going to see discount points. If there’s no cost it’s, that box is going to be empty. It makes it easier to compare. But I told him, I said, it’s not that this other lender did anything wrong. It’s just more confusing seeing three separate fees in here, add them all up.
[00:21:44] Josh Lewis: And that’s what they’re charging for the rate and what we have here to charge for the same rate. You’re going to see one fee that’s bigger than, the three that, that they had. No they’re,
[00:21:53] Brendan McKay: all in the same box for a reason. Like a, is a dollar. The name does not matter. When it comes to anything in box a it all falls under the same cost.
[00:22:01] Brendan McKay: It’s a cost to that lender. It doesn’t necessarily mean it’s bad thing though. And it doesn’t mean that if you’re looking at a loan estimate and there are some BS in there that it’s not a great deal, it very well might be a great deal. But obviously less is better, but it is tied into the interest rate they box and the interest rate are oftentimes more related to each other than people think at the offset.
[00:22:20] Brendan McKay: So you just want to make sure that you’re, going into it with eyes wide open.
[00:22:25] Josh Lewis: Can, you or Matt talk about maybe the differences there in box B in box C a lot of times that the consumers see and they say services, you cannot shop for services. I can shop for that goal. I want to shop for that.
[00:22:35] Josh Lewis: Why can’t I shop for my own appraisal? What’s the difference between the two and why does it matter?
[00:22:41] Matt Burkhead: So the appraisal is going to be set by the VA you’re not allowed to choose your appraiser or choose the company. And so that’s why it’s under box B because it’s just set, it’s standardized the credit report, you’re not bringing your own credit report to the, loan process the loan officer, where the company is going to hold the credit report for you.
[00:23:06] Matt Burkhead: And that’s what, again, as in box
[00:23:08] Brendan McKay: for that reason. Yeah. And they, there are also fees that are they’re standardized and pretty regulated. Just because you can’t shop for it doesn’t mean you’re getting raked over the coals on these fees. You’re, it’s really not going to happen. So while obviously being able to shop for something is better than not it’s, really not something that you’d be saving any money
[00:23:29] Josh Lewis: on anyways.
[00:23:30] Josh Lewis: And it’s important also to note, and maybe this is a differs, I know our contracts, just even from California’s residential purchase agreement to Arizona’s, there’s a pretty substantial differences, 90% the same, but some fairly substantial differences in you. Guys’ contracts in different parts of the country, Maryland, Arizona, California, Texas, in those different areas.
[00:23:51] Josh Lewis: Aren’t most of these things already negotiated in the contract. So even in box C, it says you can shop for title insurance for us in California, it’s been negotiated and you agreed to it in the contract. You said I’m going to use a old Republic title and there’s no shopping
[00:24:05] Nathan Knottingham: at that point. What’s funny about that is this is often done.
[00:24:10] Nathan Knottingham: Backwards. The buyer is the one who’s able to actually identify and declare who they’re going to use for title and escrow. But more often than not it’s, in a purchase transaction. The seller’s here’s who we want to use. And nobody’s eh, whatever, like we will just do it. Brenda was right.
[00:24:28] Nathan Knottingham: There’s a lot of this, the competition is so tight and there’s just so few real title and escrow. And so they just go, okay the price is basically set across your area. It’s not going to differ too much. It comes down to services and follow up and communication, but that’s usually, what’s that if we
[00:24:46] Brendan McKay: can do a separate one of these on title insurance, one time if you want me to, I’d be more.
[00:24:51] Brendan McKay: But yeah and, even there’s lots of different settlement companies and title providers, but there really are only six major title insurance providers. And a lot of the conversation would be about the fact that they, do price fix with each other and I don’t love it. It is the way things standardly work right now.
[00:25:09] Brendan McKay: So you’re not going to see any variation in it and shopping for it would be honestly, a waste of time. You’re better off complaining to your Congressman about it. If you want, so
[00:25:19] Josh Lewis: the bottom line here with the closing cost details on the left side box, a box B box C. A’s the important one. If you’re shopping, that’s what you’re shopping.
[00:25:29] Josh Lewis: So with that, let’s roll over and look at the other side. So the right column, the remaining boxes are things that are also going to be same from lender to lender. They’re not necessarily coming from the contract. They’re based off of where you are when taxes are paid, when they’re closed, when you guys want to walk us through
[00:25:43] Brendan McKay: that.
[00:25:44] Brendan McKay: Yeah, they are. And this is somewhere where you also see, you want to be careful not to fall into a trap here because wall, these will all be the same at the end of your transaction, no matter what loan officer you work with you will see variations in how they’re estimated upfront which really shouldn’t happen to the degree that it does, but you’ll have some.
[00:26:06] Brendan McKay: Opportunities out there that, that, push the line on how well they can estimate these to make their costs look lower, frankly. So you look at these and know they’re going to be whatever they are at the end of the day. Like a lot of what we’re talking about with, prepaids, for example, that depends on what month you close in and what day of that month you closed in the same inbox G like it is, it’s just taxes and insurance.
[00:26:27] Brendan McKay: The costs are whatever they are. So don’t get too caught up in that stuff. Similar on transfer and recreation taxes that, that is literally a tax to the state that you’re closing in. It is just set in stone. And you knew if your one officer makes a mistake up front, it is going to get corrected at the end of the day.
[00:26:43] Brendan McKay: Depending on how far along it is. You’re not going to pay for any mistake, no matter what on it, but yeah. So it, it is stuff that is just literally set in stone. Even though you’ll see variation. Yeah.
[00:26:54] Josh Lewis: One of the comments that we’ve had over here is someone I have questions regarding the title insurance fee, the full amount, as well as the owner’s policy under each other.
[00:27:03] Josh Lewis: You see the title owner’s policy to do when you guys want to discuss the difference between your standard lender’s policy and then the owner’s policy over here that, follows falls under the optional category.
[00:27:15] Brendan McKay: I’m happy to take a crack at it. It might change depending on the region that you’re in though.
[00:27:20] Brendan McKay: Lender’s title insurance is going to be required. Both of them protect either you or the lender in the event that an issue ever comes up down the line on the title. If there was a deed recorded on the title that wasn’t caught in the initial title search, or someone makes a claim to the property, all these very frankly, far-fetched things that do happen and that they do happen.
[00:27:41] Brendan McKay: They’re extremely bad. The lender that any lender that’s offering securitized VA mortgages is going to require lenders, title insurance to be placed on. In, every jurisdiction I’m aware of owner’s title insurance is optional. Generally something recommended there’s there is some nuance to it.
[00:27:59] Brendan McKay: I don’t know how much we want to get into it on. But it’s a one-time fee. You don’t ever have to pay it again. If you refinance, you will have to pay lender’s title insurance again, but not owner’s title insurance.
[00:28:11] Matt Burkhead: Typically owners talent trends is not very much. So like in a lot of places, it’s a hundred extra dollars, which protects you in case someone says they have claim to the house, which in my opinion is worth the extra
[00:28:25] Brendan McKay: small group. And you’re right, Matt, especially, it’s not very much, especially on VA loans because usually you’re doing 0% down and, owner’s title insurance and lenders, title insurance.
[00:28:36] Brendan McKay: They, depending on the, if you put more money down your owner’s title, insurance costs will go up because you have more equity in the property. So you have more. But for every dollar that, that goes up, your lender’s title, insurance is going to go down. There’s a yin and a yang, cause it’s just ensuring the total value of the property.
[00:28:53] Brendan McKay: It’s always going to combine at the same time. And I’m licensed in five states. That’s true in all those. I hope it’s true. The other ones, when I’m saying this, do but yeah, on a VA loan, when you’re putting 0% down, you don’t have a lot of equity, so you don’t have that much of a tech. The policy does protect future equity though.
[00:29:08] Brendan McKay: So there, there is still some costs associated to it because of that, but yeah, that’s, I think that covers most of it. And
[00:29:14] Josh Lewis: I think the bottom line, you guys both hit at it, whether it’s a hundred dollars, $500, $800, unless you’re buying a three or $4 million property, it’s a relatively low cost for a very large coverage title.
[00:29:26] Josh Lewis: Actual title insurance claims are very, rare, but when they hit, they’re very, expensive for the most part. It’s generally not a two or $3,000 payout. I actually am one of the rare cases where On a title insurance claim with the condo that I owned, it ended up being like $50,000 per unit in the complex.
[00:29:46] Josh Lewis: So they can be really big claims. It’s relatively small cost. For that one of the things here probably the most important to me on this is under section J it says total closing costs. This example has no lender credits under there, but a lot of times, especially with our veteran borrowers who may be cash constrained and wanting to get in with little to no money.
[00:30:10] Josh Lewis: You could have an $8,000 lender credit on this transaction where that then nets out to zero. So when we go back here, just a quick flip back, if you see box a or all of these boxes were even in D where it titles a, B and C. If you look over here, this is, I think it says 56, 72 in total costs. If you see a lender credit over here at 56, 72, you’re literally paying nothing for the loan.
[00:30:33] Josh Lewis: You’re paying and setting up your, impounds and paying some prepaid interest and your first year hazard insurance. But the lender credit is really important. So you want to net that out. So we go back and say, you’re shopping for a loan box. A is critical, but you want to net that to those lender credits for each lender, because let’s say one lender has nothing in box.
[00:30:53] Josh Lewis: A, another lender also has nothing in box a and they have the same rate, but one’s giving you a $3,000 credit. One’s giving you nothing. That’s an important number for you to look at. No doubt.
[00:31:05] Matt Burkhead: And also on to look at it another way, too, is a lot of vendors will make, talk up the lender credits a lot because that’s the attractive part.
[00:31:15] Matt Burkhead: But then maybe in box a there’s a ton of fees where all that lender credit is eaten up by all the fees in boxing. So you definitely want to compare the two and see like what the net is
[00:31:27] Brendan McKay: for those. Yeah.
[00:31:28] Josh Lewis: That’s an awesome point because one of the craziest things that I’ve seen is you’ll see someone charging discount points and giving a lender credit.
[00:31:36] Josh Lewis: And you’re like I don’t even understand what that is. It’s I couldn’t do it with my lenders. I don’t know about you guys, but you’ll see it oftentimes on retail, direct lender side, they’ll do it. And again, it doesn’t matter. It nets out as long as you can do an accurate comparison, but like, you said, Matt, it’s often meant to confuse borrowers, whether they’re veterans.
[00:31:56] Nathan Knottingham: So I went through I posted a couple of things. Number one, the loan estimate that you have the four pages that come through here, we’ll get to the last two here shortly. They come as a response to the safe act. Dodd-Frank a lot of the things that changed move from the good faith estimate and the till the truth and lending act to a form that was supposed to be easier for a general consumer with no background or education or experience in real estate whatsoever to walk in and see a document and understand exactly what they’re being charged, what they’re were being credited and where it went.
[00:32:30] Nathan Knottingham: It’s not always that easy. But as we laid out. But there is a good, and I put the resource down here, consumer finance CFPB put out a loan estimate guide. They break this down too. And they go point by point, you can just click on it page by page. And what does this mean? And what am I looking at here?
[00:32:46] Nathan Knottingham: That’s a good way. If you’re a researcher and you, this is your first time or you’re in the group, you’re like, oh, I want to buy a house. I don’t know what to how do I do this? That’s a really good resource to go back and read to just later on. And something that was really interesting. I wanted to call out just because the first time I bought my house in 2006, my first home, I paid this title insurance.
[00:33:07] Nathan Knottingham: I had these fees and I thought, oh, sweet. I’m covered. Not knowing I did a per sale by owner. Which was an experience. And I didn’t know how to do a lot of the things I needed to. And my loan officer was fantastic. He was my uncle. But even he didn’t tell me all the things I needed to know.
[00:33:26] Nathan Knottingham: And so when we got in the house, two months later, my toilets in my tubs are backing up with all the sewage. I’m like. Oh God. Oh my gosh. Okay. But we have title insurance and guess what? Title insurance doesn’t cover, right? Title? The church doesn’t cover the physical property. It’s only if somebody’s done work on it and said, that’s my home because I was never paid for it.
[00:33:48] Nathan Knottingham: And they put a lien in, the end against it. And then as we’re clearing it up, we found an an old septic tank that was completely empty that had never been filled in and decommissioned. And so I thought, okay, maybe title insurance will cover that. They’re like why I call them? And they’re like, hi, we don’t understand why you’re asking us this question.
[00:34:08] Josh Lewis: I don’t know who to call. I didn’t have
[00:34:09] Brendan McKay: a problem. Probably just happy to get a phone call.
[00:34:14] Nathan Knottingham: So when you’re doing that, remember it’s about ownership. It’s about actually when you move in the house and like you said, Josh he don’t want the knock on the door being served papers Hey, we did work on this property 24 months ago.
[00:34:27] Nathan Knottingham: We’ve had a lien against it. We recorded this jurisdiction. It was never answered. Now this house is ours. You’re like, whoa, I just bought it two months ago. I don’t know what you’re talking about. That’s what title insurance is there for. And it was a good protection, but sorry, I just, I wanted to interject that as we have what, 54,000 members in this vetted VA group, specifically, who had a, many of them are just doing this for the first time.
[00:34:49] Nathan Knottingham: They need to know these lines are important. These lines are required. Many of them, many of the fees, instructors as Brandon pointed out, as Matt pointed out are required, but we still tell you to shop. And that’s why.
[00:35:01] Josh Lewis: And we’re over 30 minutes into this discussion and we haven’t even got to the third page.
[00:35:05] Josh Lewis: Third page is pretty simple, but it’s several people have pointed out here. You could go deeper on this. You could probably sit here for an hour and go through it all. But hopefully you see those are the big and important parts, but just quickly jump over here to page three, Matt, you want to run through this, detail and what this gives us in terms of information.
[00:35:23] Josh Lewis: Yeah.
[00:35:23] Matt Burkhead: So this one is just meant to be able to give you a comparison. So it’ll break it down and five years the total interest and then compare that to the principal that you would have paid off in the beginning of mortgage, A lot of your payment is going to interest and not very much is going to the actual principle which pays down the loan.
[00:35:45] Matt Burkhead: And then over time the amount that it’s going to interest gets less and the amount towards principal increases, and then you’ll have the APR, the annual percentage rate. And this is the cost of the loan express and a percentage. Now I am not a big fan of APR to be honest. It means well, cause it’s meant to be able to take APR and compare it to another APR, but not every lender has the same thing as an APR.
[00:36:16] Matt Burkhead: So I don’t think it’s a very accurate way to compare to loan estimates. I think the better way is just to look at the percent on the first page and then look at the different fees that we talked about in box a and any lender credits that are on. Yeah. And then a total interest percentage that’s over.
[00:36:36] Matt Burkhead: The life of the loan, I believe.
[00:36:39] Josh Lewis: And that’s a, it’s a crazy one that they added in here. Cause it, what, how is that actionable to a borrower? If you have a higher interest rate, you’re going to have a higher total interest percentage. The lower interest rate is lower. Like I think borrowers intuitively knows other things being equal.
[00:36:54] Josh Lewis: I would like a lower rate.
[00:36:57] Brendan McKay: No. And the only thing I’d add on APR is, and I agree absolutely with everything that Matt said, like it is a very well-intended number. And like the difference between that and rate his interest shows you how much interest you’re paying APR shows you interest plus closing costs plus funding fee.
[00:37:13] Brendan McKay: But the way interest is calculated can vary from one institution to another. And the specific problem is that a lender credits. So the credits that would be inboxed J do not offset costs in, in, in box a or any other box. So all those closing costs that are tied to doing your loan. Those calculate towards the APR calculation, but the credits do not, which doesn’t make any sense.
[00:37:36] Brendan McKay: So you could have a quote from one loan officer that’s actually lower in costs because it has a large credit. But the APR is higher. Because of just the way that the APR has calculated. So don’t lean on it too heavily. For sure. It’s easy enough to just look at interest rate box a box, Jay and see, who’s giving you the better deal.
[00:37:57] Brendan McKay: I think APR can throw people off more often than not. And if you have a loan officer pointed APR, but by IVR as a little reminder here is lower again, explain why their actual costs are lower. That’s that’s probably what’s happening there.
[00:38:11] Josh Lewis: Matt, you want to roll through the little things, the little housekeeping things they kindly throw in on the last page of this document. Yeah. And then it
[00:38:18] Matt Burkhead: just goes over the appraisal. Just basically that’s determined the value of the appraisal. And you’ll get a copy of that from. And then for assumptions this is something that is allowed on VA loans.
[00:38:33] Matt Burkhead: It’s when someone else basically takes over the loan they qualify for it and take the loan over with the same terms as what it was originally done. And then homeowners insurance that’s going to be required. For all lenders are going to require the homeowners insurance that protects you, and your property, I, in case there’s a fire things like that. So Homer’s insurance is a good thing it’s different than mortgage insurance, right? The mortgage insurance protects the lender. It doesn’t do anything for you. That’s, what’s great about the VA loan. It doesn’t have any mortgage insurance and then late payments it’ll go over the fees.
[00:39:14] Matt Burkhead: Typically it’s, after 15 days, there’ll be a late fee. I won’t show up on your credit report just yet lates on the credit reports are only after 30 days. But you could still be charged no, a $50 fee or $75 fee for making the payment after the 15th. And then refinance and servicing it’ll just talk about who the loan is actually service by.
[00:39:40] Matt Burkhead: A lot of loans are sold on sometimes, immediately, sometimes after a year or two. And there’s not really any way to control that. It’s all based off of the secondary market with mortgage backed securities and all that. There’s not really any lender that is going to service 100% of your loans.
[00:40:00] Matt Burkhead: They may service the vast majority like yours could just happen to fall into a bundle of loans that are being sold off. And the servicing rights you be.
[00:40:10] Josh Lewis: Matt, as you were going through that what, all of these things are? It reminded me of some, it made me think of something that, that Brendan had said earlier that this is not a perfect form.
[00:40:19] Josh Lewis: It is it’s way better than what came before it. There really wasn’t standardization. You had to get a good faith estimate. There was no laws governing what had to go in there. So you, two people show up at closing with something vastly different than what they were disclosed up front. So this is far from a perfect form, much better than what came before it.
[00:40:38] Josh Lewis: So in terms of looking at it, like the pieces where it talks about refinance, you may not be able to refinance it. No kidding. The no loan. Do you have a guaranteed refinance in the future? You’re always going to meet some sort of criteria, but in the last downturn, a lot of loans had a balloon in two or three years and they were sold as, Hey, no problem.
[00:40:56] Josh Lewis: You’re going to build up equity. You can refinance out of this. Hey, guess what happened? It didn’t work out that way. So the government says, let’s add that in their appraisals, people were saying, I didn’t even know what my home was worth. So they put this thing in here. Hey, you’re going to get a copy of it.
[00:41:09] Josh Lewis: Just some of the things, even on page one and two. All of the information is there to make good decisions. And it’s definitely laid out way better than it was before with, what we have available to us and what legends we’re required to do, but it’s still, it’s not the best, but it’s what we have.
[00:41:26] Josh Lewis: So when we’re operating under this, Brendan and Matt did an awesome job of breaking this down and pointing out the fine details of, what you want to look for and what you need to, look at. But any big overview or closing thoughts on looking at a loan estimate or what you guys refer or recommend to your clients as they’re going through them?
[00:41:46] Brendan McKay: No, I think we covered it honestly. The only like parting thought I’d have on is if anybody listening, ever has a question about a loan estimate that they have, and they want some help on it they can take a screenshot of it submitted to veteran. VA will not get approved to the group at large, and the moderator will be happy to review it with them and make sure that they’re looking at it transparently.
[00:42:05] Brendan McKay: I think it’s an awesome service and better VR.
[00:42:07] Josh Lewis: One of those moderating rules.
[00:42:10] Nathan Knottingham: It is, it’s one of those good points. I’m glad you brought it up Brendan. Cause from the get-go we, did initially realize that’s not a good idea because the personal information on there that we weren’t always getting blacked out.
[00:42:22] Nathan Knottingham: But we want to provide some detail, right? So it’s not, it’s more, we get questions. And, what I’m gonna do is we actually had a pending post that we can’t answer this post as written. And I want to dialogue with you guys as to why did we just walk through 40 minutes on what exactly is this loan estimate?
[00:42:43] Nathan Knottingham: And somebody came in and posted this, and I would love to get this person an answer, but without seeing the details, I can’t, here’s the question I’m put up on the screen here. Closing costs on a $415,000 house loan in Florida, quote, around $20,000. Is that about right? Why can we not answer that?
[00:43:02] Brendan McKay: A million reasons.
[00:43:04] Brendan McKay: First of all, in Florida, one county to another determines who’s paying which part of title insurance. So that’s going to vary if we don’t even know what county is. That’s getting super granular, but then backing up further than that. We don’t know if this person is exempt from a funding fee or not which is going to have a huge impact on it as well.
[00:43:23] Brendan McKay: And we don’t know I don’t know, there’s probably some other things, but those are the two biggest that come to mind how much the property taxes are on the home. If they’re including escrows in that number or not. So there’s just way too much left out. And honestly it’s, always going to be a question that’s never really going to get answered publicly because it’s very difficult to provide literally everything that’s needed to be able to answer the question without disclosing personal information, like your credit score, for example before being able to accurately answer it or what the interest rate is yeah, there’s it’s, just, that’s tough,
[00:43:59] Matt Burkhead: pretty detailed conversation maybe 10, 15 minute conversation with the person to go over all the details about their situation, their specific situation in order to give a good answer and
[00:44:12] Josh Lewis: explain.
[00:44:13] Josh Lewis: And I don’t know about you guys, but some of the best conversations I have had with, vetted VA members are about an estimate that they were concerned about. They send it in and we take that conversation offline. And sometimes they’re concerned, they think they’re getting screwed and you go through it and you go, no, this is what this is.
[00:44:29] Josh Lewis: This is what it is. It looks like you’re in good hands. And they have peace of mind. Other times. They’re like, I think this is great. I’m getting a 2% interest rate and you look, you are getting destroyed. You don’t want any part of this loan. So it’s not to say anything bad about the members, your embedded VA, you guys have jobs that you go through every day that don’t involve loan estimates and running through this.
[00:44:50] Josh Lewis: So it’s one of the cool things that I think one of the ones I had someone in Louisiana, I can’t do a loan in Louisiana. I have no dog in that fight. I just want to go through and help you make a good decision. So it is one of the cool features of the group. And it is one of the rules that we have to be aware of, what not to approve and how to follow up and take those people offline and get the questions.
[00:45:10] Josh Lewis: But it
[00:45:10] Brendan McKay: is nice. Because even if, I’m not in that jurisdiction, I can still answer it the overwhelming majority of the time, because it comes down to lender costs, all the other stuff that you can explain it’s important to know what it is, but it’s, all going to be the same. From, one lender to another it’s the lender fees is where you’re going to see the variation.
[00:45:30] Brendan McKay: And that, that is not really a jurisdictional thing. So yeah, that’s
[00:45:33] Nathan Knottingham: true. And one of the other things is, you’re right, Josh. If we get one and it’s oh man, this here’s what you need to know. If your loan officer didn’t explain this to you or some loan officers, sometimes the way it’s explained, just doesn’t ring true.
[00:45:47] Nathan Knottingham: And you need to hear it again from somebody else. And that’s one of the reasons we’re here to, empower the VA eligible buyer borrower that, Hey, we can clarify for you these questions or. Ask this question of your loan officer or, offer like this as an idea and see what they come back with. Because maybe they could sharpen the T sharpen the pencil here and here, but for whatever reason they didn’t. And if you ask these questions, they may, and we get a lot of, that coming back to is yes, that’s a positive that’s exactly what happened. But the way that question was posed to the reason we can’t, these guys are absolutely correct.
[00:46:26] Nathan Knottingham: Plus I don’t know what 20,000 and closing costs means. There’s a lot there and that’s just, it’s one that we would love to answer, but we need a little more detail. We had another one. Oh, go ahead. I want to touch
[00:46:39] Matt Burkhead: on one thing on the loan estimate real quick. So I don’t think we touched on this is there could be fees on there that won’t be on there in the end.
[00:46:48] Matt Burkhead: Like for example, a survey fee, might be put on there for $800. There’s already a survey that’s been done by the existing homeowner and you’re going to use that. So that would get taken off in the process. You’re not going to be charged for things that were not actually done right.
[00:47:06] Matt Burkhead: Services that weren’t actually completed.
[00:47:08] Brendan McKay: Oh, absolutely. But they will be disclosed upfront. Because until they have verification from the settlement company in this case that there already is one and we don’t need a second one, the lender’s going to disclose it because if they don’t disclose it, and then that cost does come up, they have to eat it and they’re in business to make money.
[00:47:26] Brendan McKay: So they don’t want to do that. So that’s absolutely.
[00:47:29] Nathan Knottingham: And that’s the reason it’s part of the trip, the Tila and respite integrated disclosure act has the tolerance. So there’s tolerances where if some of these fees changed from zero to 10%, that’s okay. But it can’t go up higher than that. There are some that have zero tolerance.
[00:47:45] Nathan Knottingham: So if it comes out, the fee comes off. No problem. It saved you the borrower money, but if they didn’t quote the fee and then they find out they have the fee like the survey and they try to put it on there, they can’t do it legally. And so that’s going to put them in a bind. So a lot of times, Matt, I’m really glad you brought that up.
[00:48:03] Nathan Knottingham: The initial loan estimate is. In many scenarios going to be the worst case scenario you can have for that load, with that borrower. And that’s what it’s supposed to be. So when you get to the end, when you get to the closing table, your greatest surprise is how much money you didn’t have to write that check for.
[00:48:20] Nathan Knottingham: Hopefully, yeah.
[00:48:23] Josh Lewis: Something here that, I think is interesting. I would love to get you guys’ feedback on this. One of the things that Brenda and I have worked on Brendan has a really cool spring. For how they present options on a refinance to borrowers, and it gives you all of the important information and it allows you to compare different options and see different ways of structuring alone.
[00:48:42] Josh Lewis: That is not what the loan estimate is for the loan estimate is to make sure you understand clearly what this loan that you have, signed on for, or are signing on for does. So we have other documents. I don’t, you’re not going to get a loan estimate until we’re in process. It doesn’t mean I’m hiding anything.
[00:48:59] Josh Lewis: We’re going to give you the breakdown of it, but where, do you guys fall in on this? Like sometimes I’ll have someone that I can almost tell that they’ve been shopping or they’ve talked to someone else they’re like, you didn’t give me a loan. You’re a hundred percent correct. We can send that over to you.
[00:49:12] Josh Lewis: Here’s why we didn’t. But where do you guys fall in on either something like mortgage coach or Brendan, your spreadsheet, where you do the comparison, a fee worksheet. We have our system kicks out a comparison that does up to three different options and gives you a full accounting of all the costs, but maybe explain to the folks watching at home, why there are tools that are actually better in the decision-making process than that loan estimate.
[00:49:35] Brendan McKay: Yeah. I, obviously, I think it’s better otherwise I want to use something different. But yeah, I think that there’s just a better way to design and present the numbers and show multiple options at the same time while still being completely transparent about the breakdown of all the costs.
[00:49:51] Brendan McKay: So I just think there’s better ways to design it. And I think generally speaking, if you’re working with a loan officer that, that, that has a good reputation, you consider trustworthy, you can bank on those numbers just because they’re on an official loan estimate. It doesn’t mean if it doesn’t say rate locked up in the top right corner.
[00:50:07] Brendan McKay: It is. Exactly worth as much as the paper that my, my estimate on my own sheet is written on. If the rate’s not locked, you’re relying completely on the reputation of the person that’s giving it to you. So I think you can count on that, that, that being said if I have a somebody I’m talking to ask me for a loan estimate, I know they’re doing it because the other person they’re shopping with, oh, get a loan estimate from him.
[00:50:28] Brendan McKay: Like some other thing, I’m happy to send it to them. It’s, not difficult. It’s a couple of extra steps, whatever I think it’s worth. But if it makes it easier for them to shop, I’m more than happy to.
[00:50:40] Nathan Knottingham: I think that you also have to clarify too in a market like we’re in currently with a lot of change, really fast really, fast.
[00:50:47] Nathan Knottingham: A loan estimate unlocked is exceptionally worthless. Unless you are going to do a lock that day and you have to get, and even within the next couple of hours, markets change fluctuations change. And what that means is not necessarily will those box B C E F, right? Those won’t change as much as the a it’s a is going to modify based on the rate you’re getting and the payment, if you even qualify for the debt to income ratio.
[00:51:13] Nathan Knottingham: So you have to know that a loan estimate doesn’t have a shelf life for 72 hours, a loan estimate, if not in this market, especially, but if a loan estimate unlocked really has no shelf life, it is a, this is what my moment is in time. And if I go over to Josh and get one, this is what it is. Here’s what I need to do.
[00:51:34] Nathan Knottingham: And then you need to make your decision for you. And also
[00:51:36] Matt Burkhead: if it’s not locked, not every single lender will disclose discount points. If the loan is not long, so it could be drastically different once it is locked in. And now they’re required to show those discounts.
[00:51:51] Brendan McKay: And to that point, you, a lot of times buyers think that when they lock, they’re committed to that lender, that is absolutely not the truth.
[00:52:00] Brendan McKay: I think there should be a decorum where there’s a good faith commitment that if they lock and it’s the same terms they promise, and this and that you’re, going to do your best to work with that person. But legally absolutely not. And if they lock in the terms, get way worse, you’re under no commitment whatsoever to continue to work with that person.
[00:52:17] Brendan McKay: The VA loan in particular is, I don’t know if I should be saying this, but it’s one of the easiest loans to switch from one loan officer to another midstream. I don’t recommend doing it Willy nilly, but if, things are not going well, the appraisal can be transferred at the term. What they were promised.
[00:52:34] Brendan McKay: It can be moved over and picked up in process. And the next person, if they know what they’re doing, don’t just go to some other big lender or online lender. But if you’re working with someone that knows what they’re doing, they can pick it up midstream. And Ronald’s it.
[00:52:47] Josh Lewis: One of the things Brendan that you hit on and that we see a lot in the group is more so last year when we were in the middle of a refinance market, heavy refinance market rates are really low.
[00:52:58] Josh Lewis: Everyone wants to post, I got this rate, is it the best rate ever? Or they wanted to brag. I got this rate. They never say discount points. And some of them rates didn’t get that low. You did not get that with your points. You paid money to get it. So it’s another one of the rules. We don’t post stuff like that because the person bragging about the lowest rate is probably not telling the truth.
[00:53:17] Josh Lewis: But what I like to tell people a rate is very important. Part of the reason why this group exists is there are large online lenders. Purposely pursued veterans and they’re very high priced. So part of the reason why Christopher made this group was to protect veterans from paying a half percent, three quarters percent higher than they need to.
[00:53:37] Josh Lewis: And in that at least
[00:53:38] Nathan Knottingham: know why or what was happening. Don’t get swindled without knowing it was like B, we have a place you can go and say wait, is this right? And get the, and now if you decide to do it more power to you, all right, we’re there to cheer you on, but at least
[00:53:52] Josh Lewis: now, and with that difference, if something’s a half percent or three quarters percent difference, the greatest loan officer in the world is not worth paying a half percent more in interest for now.
[00:54:02] Josh Lewis: If we’re talking reputable lenders, I would say, if you talk to every vetted VA pro mortgage originator in this group and God alone estimate, we’d all be within an eight, maybe a quarter percent. Nathan, you have the data then that for the most part, pretty accurate, we’d all be within about an eighth of a percent interest.
[00:54:17] Josh Lewis: Okay. Yeah.
[00:54:18] Nathan Knottingham: If I draw regional radiuses around you guys are all super tight.
[00:54:22] Josh Lewis: So when we look at that the most important part, and this isn’t being self-serving, I’m saying that a reputable lender should be in a very narrow range on that. So you should be working with the person that you like and trust and what is like me.
[00:54:37] Josh Lewis: And it’s not oh, Hey, Josh is fun to talk to or be around. Cause we’re not going to be around each other that much. Does Josh explain it in the way that I understand it, if not, you might be better off with Matt or Brendan. And I also, it brings up another thing I wanted to point out when we do this every Tuesday, it’s not always going to be four dudes.
[00:54:54] Josh Lewis: We have some amazing women in the group and they will be here educating us on, everything that they know.
[00:55:01] Nathan Knottingham: Good, shout out. We had another, we got a question that popped in, but before we get that one, I want to throw this up here. There’s a post that hit a couple hours ago and here’s the last part of the post.
[00:55:11] Nathan Knottingham: And it says, however, and a little bit of preemptive about their purchase. Now we have a letter saying our escrow is calculated incorrectly and our payment is going up $400 a month. Has anyone else had this happen? First of all, I want to say personally, I just got that letter myself, bought the house. I’m sitting in an August intact.
[00:55:34] Nathan Knottingham: And what’s been happening, right? The market has been growing like crazy and the tax assessors are not slowing down. They’re watching carefully. They’re like, oh look, the property values are going up. So what happened is the calculation under RESPA, the escrow calculation, my lender can only hold two months of my taxes, my property tax in, holdings.
[00:55:57] Nathan Knottingham: So they can have a total of 14 months at the time that bill is due. They did their calculation. They said, oh my gosh, by the time this Bill’s due, you’re only going to have 60 bucks left in the account and what if we run out? And so they’re raising my they’re raising my escrow pains. Yeah. Taxes and insurance, part of my payment to cover, to make sure there’s enough money when the taxes come due.
[00:56:18] Nathan Knottingham: That’s rough.
[00:56:19] Josh Lewis: So
[00:56:20] Brendan McKay: th
[00:56:21] Brendan McKay: the thing I’ll say on that is sometimes a mistake was truly made and, they weren’t peculating correctly. And I, and that sucks. It, feels bad, but you’re not. Getting robbed, like you were paying less money all along. I recognize it feels bad, but w what happens more often is what Nathan was alluded to, because it wasn’t necessarily calculated incorrectly.
[00:56:42] Brendan McKay: The lenders only allowed to collect taxes based on what the taxes are at that time. And, just as he was saying, values have been going up and the counties and the states want their money. So they’re going to raise the they’re not raising property taxes. No one wants to do that. But the, if your value of your homes going up, the assessed value is going to go up and the higher percentage tax rate.
[00:57:02] Brendan McKay: So I know people are like, my last lender could never get my escrows, it probably had more to do with the fact that your property value has been going. And the only alternative, which is not legal for soon to be obvious reasons would be the lenders like, oh this house is in Austin, Texas. We know it’s going to be worth so much more in two years.
[00:57:20] Brendan McKay: Let’s add that as for our accountant collect more of your money right now. So we don’t have to adjust it later. Nobody wants that either. So it’s just it sucks when it happens, but it’s in your best interest because it means they’re waiting longer to collect more money from you, even though it feels crappy when it happens.
[00:57:37] Matt Burkhead: And it could also be the homeowner’s insurance or a combination of both of them, because I know a lot of places due to the storms and things like that, the homers insurance renewals are more than they were in the past.
[00:57:49] Brendan McKay: Yeah. Or if you make, a claim, if you made the claim on an owner’s insurance policy, your premium is going to go up.
[00:57:54] Brendan McKay: And that’s, and that might be very delayed, right? It might go up the, lenders are only analyzing or escrow once a year. Usually it’s in February for most. And so if you make a claim like right in February and it’s renewed a month later or whatever, like that’s not going to get caught for another 11 months, it could be even longer than that.
[00:58:12] Brendan McKay: But now that’s, the skinny.
[00:58:16] Matt Burkhead: And then what bring to pay attention to is on a new build as well is to make sure that so on a new build initially only the land is being taxed, right? So it’s a lot lower tax. No, it could be $700 a year. Very low amount. And then once you put a house on there say it’s a $300,000 house now the value skyrockets.
[00:58:37] Matt Burkhead: And so just making sure that you’re paying attention to that because sometimes that’s a big reason why the taxes and the escrow goes up incredible amount in that first year is because only ESCOs for land
[00:58:52] Brendan McKay: were collected and cause that, and that is a spot where settlement companies in some jurisdictions can, make up an estimate.
[00:58:59] Brendan McKay: I want, they expect it to be. And, a lot of times that estimates based on the sales price, and by the time the house is done, it’s worth way more than what you paid for. It. All these are all problems caused by good things for you. You won’t realize it until you sell your house. But it is a good thing.
[00:59:15] Brendan McKay: And so you will see that on new construction for that reason, too.
[00:59:19] Nathan Knottingham: So when we bought my own, I bought my second house in 2017 in Washington, it was a brand new construction, bought it from a developer. He bill who’s building about 18 homes, this little neighborhood, and we had to pay I’ve always heard the term millage rate, basically.
[00:59:33] Nathan Knottingham: It was the value of the property. As you were buying it times a certain percentage to basically see your escrow account, had the money in it until it was fully assessed. That really stunk writing the check. But it was really nice because I overpaid. And so I wasn’t caught off guard. I got money back from the escrow analysis versus paying into it.
[00:59:55] Nathan Knottingham: Somebody asked specifically, do you all think the market will or what do you got? Brandon? You see the question or
[01:00:02] Brendan McKay: No, I’m laughing. That’s all the question
[01:00:06] Nathan Knottingham: you all think the market will ever be a buyer’s market again
[01:00:10] Brendan McKay: Ever, as a long time. I like probably I will while we’re alive.
[01:00:19] Brendan McKay: Now I, don’t play soothsayer. I, think eventually, yeah, it’ll happen if you’re sitting around waiting for it to happen before buying a house. I don’t know if that’s the best tactic on earth. There is a real housing shortage. There’s a backlog of houses being built in this country because of the last recession and getting caught up to it.
[01:00:37] Brendan McKay: So it’s a real supply demand issue. And I don’t think it’s going to fix overnight. There are things that could fix it. That would be, very unpleasant for the rest of the world. But yeah I wouldn’t sit around waiting for it for.
[01:00:52] Josh Lewis: One of my realtors and I do a live every Wednesday.
[01:00:56] Josh Lewis: And some version of this is the most common question that we get other, and they w they frequently violate Christopher’s rule of not cursing when they’re saying this, because it is it’s painful and it’s frustrating for people out there in the market. But truly it does always come down to supply and demand.
[01:01:16] Josh Lewis: So we have a large generation of millennials coming into prime, home buying age. We’ve had underbuilding since the last downturn. And you see those issues in one of the things that the thought was last year is, Hey, if rates go up, like we expect them to next year and they’ve gone up a lot more than most anyone expected or anyone that I know expected that would slow down the demand.
[01:01:40] Josh Lewis: So you have willing demand enabled demand. What I tell people is I’m willing to buy a house on the beach in Malibu, but I’m not able to demand. So I’m not a real demand there. And we’re seeing the same thing. Most people are willing to buy a house. Are they able to buy a house? So as rates. We have less able buyers.
[01:01:55] Josh Lewis: So the thought is supply is limited, but now we have less demand. What we’re seeing is the higher interest rates are also limiting the supply as sellers don’t want to sell as for them to move and buy a new home. They’re looking at higher interest rates and higher costs. So until something happens, you know what to change that supply demand imbalance we’re, going to have a hard time with it.
[01:02:18] Josh Lewis: And the thing that it’s interesting in a conversation like this, we’ve got Arizona, Texas, California, Maryland, four different parts of the country. It, does vary regionally, but not as much as you would think. We get on YouTube every week. We have people all over the country dealing with this
[01:02:34] Brendan McKay: and in the areas that you have the most demand the, people buying all things.
[01:02:39] Brendan McKay: Like more often than not have more disposable income. So it’s that they’re not going to go, man rates went up this half million dollar house I wanted to buy is no longer affordable. They’re just going to be like, ah, crap. It probably cost more than it did two weeks ago, but I can still afford it. So let’s buy it that’s it and then rents going up at the same time too. So it’s not like they have this, other option to go to that. That is staying the same or getting better. It’s getting worse over there too. So all and every, you need to live somewhere, so all options are getting more expensive. So it’s not it’s, not really, it does not seem to be slowing things down.
[01:03:17] Josh Lewis: And that’s multiple different regions around the country. And what we see on that live is it doesn’t matter where people are, everyone. It’s like the questions in vetted VA. Everyone thinks their situation is unique, but it’s very similar to a lot of the other. Question’s been answered everyone pipes up I’m in Atlanta, this market’s nuts.
[01:03:33] Josh Lewis: I’m like, okay someone could say that in Austin or in Tallahassee, or in your market, in, in Maryland, there are a handful of markets that people that they don’t have as robust an economy or people are migrating away from that. Don’t suffer from that. So it’s difficult in this forum to give you an answer nationwide, it’s going to be different in every market, but for the foreseeable future, I’m know that Matt Brendan, you guys, how many pre-approval letters and preapproval packages, we have to send out for a buyer to get an offer accepted.
[01:04:03] Josh Lewis: And that’s because it’s 15, 20 offers still on nearly every property. I can’t tell you when the last time was that I had a bad. That just, they wrote an offer and theirs was the only one. And they got it accepted. Have you guys seen that in the last 18, 24 months? No,
[01:04:20] Brendan McKay: I haven’t. I in rare situations where somehow the seller actually over listed and it sat for a week.
[01:04:28] Brendan McKay: But yeah it’s not the real answer is no. And I,
[01:04:32] Josh Lewis: so I think the answer to this person’s question, we’ll start seeing it. When we have our buyers, having an easier time of getting their offers accepted, then you’ll know it’s softening and you’re getting closer to a buyer’s market. And unfortunately, even though there may be less offers on properties now it’s still competitive enough that I’m not seeing that in, in the Southern California.
[01:04:51] Josh Lewis: And we do loans all throughout California. It’s no different in the central valley or the bay area or anywhere else. And just
[01:04:56] Brendan McKay: because like things stop or even if things become less insane than they are right now, that does not mean home prices are going to go down. It might mean they, don’t go up as quickly as they are right now or they flatten.
[01:05:10] Brendan McKay: But it doesn’t mean they’re going to go down. So it’s like you’re sitting there cause that’s the, hidden assumption with that question oftentimes is like, when’s it going to cool off as in go down and it, might cool off, but it’s it’s 150 degrees right now. It can go to 120 degrees and that is still cooling off.
[01:05:34] Brendan McKay: It’s, a pretty relative question. So it’s, that’s why I just don’t, I don’t recommend necessarily sitting there waiting. I, always like to preface this with, I, I don’t know though. I, truly don’t know. So you get all the information you can and make the most intelligent decision you can for you and your family when considering all the possible outcomes.
[01:05:54] Brendan McKay: Yeah.
[01:05:54] Matt Burkhead: Because no one knows what the future is going to hold. As long as you do your research, gather the information and then make it in the form of decision based on your situation, right? When is it right to buy for you and your family? You can’t really go wrong with
[01:06:10] Nathan Knottingham: that? No doubt. We had a interview done with Logan Shami just a few weeks ago, and it’s pinned at the top of the Veta VA group.
[01:06:18] Nathan Knottingham: It was in our lives and our pro group and our YouTube channel go find that he does such a good job. Remember supply and demand. If you learned it in macro and micro economics in high school or college, or maybe you just understand that when there’s fewer things, the price goes up because there’s more demand for them.
[01:06:34] Nathan Knottingham: A buyer’s market is the other side. There’s more houses and we have less than a month worth of inventory everywhere. When they look at inventory numbers by transaction data it’s, pretty remarkable
[01:06:44] Josh Lewis: And maybe I forgot that you guys had done the interview with, Logan. He was one of the first economists that.
[01:06:51] Josh Lewis: To light this supply the under supply, the under building since the last downturn and then that front edge of the millennials growing in age. But what his expectation was, what we would see through 2024, which is the peak of that millennial generation in their prime buying age, we have already exceeded what he forecast as appreciation through that timeframes.
[01:07:15] Josh Lewis: You got to ask does Logan not know what he’s talking about? No, no one could have predicted COVID and rates on VA loans going down close to 2% other loans in the mid two’s high twos like that just, it really changed the math in many, ways. And again, Logan has his finger on it, as much as anyone so much like Matt and Brendan were saying, we don’t have crystal balls.
[01:07:38] Josh Lewis: We do have smart people that we talk to and you look and forecast as well as you can. And even that can be.
[01:07:46] Nathan Knottingham: And I should say that somebody said, it’s sad. It is hard, right? If this, if you’re trying to get into your first home and you’re like, ah, I’ve been waiting, I’ve saved my money. And now what in the world do I, do you keep working, do not give up.
[01:08:01] Nathan Knottingham: You do not give up. You I’ve seen a couple posts where people are just super deflated. They, their rent’s going up. They’ve had their seventh offer this year. Not accepted, do not give up, keep fighting, keep looking. Now there’s other things you can do. And this is where jobs are. They’re a draw, right?
[01:08:19] Nathan Knottingham: They’re a centrifugal force that pulls us into certain areas, certain jobs you have to be somewhat close to, but if you have the flexibility to be even remotely outside of. Broadened your mind broaden your horizons to where you can go and look for markets that are starting to grow or showing or really good thing is to go look at the economic development plan for that area.
[01:08:41] Nathan Knottingham: Look it up for the county. Look here for the city. Where is the municipal money going to invest in an area and start looking for homes in that place? Because that was just a, we could go into a whole, another topic on that one, finding emerging real estate markets. They are still there. Don’t give up.
[01:08:59] Nathan Knottingham: But I asked, we just got a pending post in the Facebook group and I asked Orlando if I could answer this for him live. And he’s sure, absolutely. So let’s talk about this because we’re going to totally go like totally different direction. Okay. Here’s the question. If I co-sign for another person, my mom do I lose the first time buyer status in my VA benefits.
[01:09:25] Brendan McKay: Unless you’re using part of your VA eligibility for this transaction, which is probably not the case then no, you do not lose your first time buyer status as a VA benefit. It’s not about being a first time buyer. It’s about using your VA benefit for the first time. That’s what managing
[01:09:42] Nathan Knottingham: the funding fee the first time.
[01:09:45] Brendan McKay: Yep. If you own 10 homes, but you want them all in cash or use non VA financing for it. And then you finally buy a home and use the VA loan. It is your first use of the VA. So you are, you’re treated as such. Yeah.
[01:09:57] Matt Burkhead: And the difference between the first time use for the funding fee. So first time use is 2.3% and then subsequent use is 3.6%.
[01:10:06] Brendan McKay: And that’s only relevant with 0% down. I’ve had some people think it’s always more expensive. If you put 5% down, it’s 1.6, 5%, whether it’s your first use or. And same with 10%, it goes to 1.4% and then it doesn’t matter after that. And then of
[01:10:21] Matt Burkhead: course, if your VA disability, then it’s waived
[01:10:25] Nathan Knottingham: completely,
[01:10:25] Nathan Knottingham: Yep. And that’s a disability of how much, what percentage. Okay.
[01:10:30] Matt Burkhead: It’s just a 10% or more. So if you receive VA disability, which you receive at 10% more, you don’t have to be a hundred percent or anything like that. So if you’re getting any VA disability benefits from the VA you would be exempt from the funding fee.
[01:10:46] Matt Burkhead: And if your certificate of eligibility if you pull your own and it doesn’t show the exemption status, which sometimes does happen all you do is submit your disability paperwork. You can have a loan officer do that. They submit it to the portal and then your certificate of eligibility will get.
[01:11:03] Nathan Knottingham: Yeah. And for this one too, you’re looking at chapter seven. So if you’re like what VA lender handbook, 26 dash seven chapter seven. You’re going, what you’re asking about is it’s co-signer but in the VA world, it’s called joint loan. So you’re, talking if your mom in this case is not a veteran, but you are, you have a veteran to non-veteran joint loan scenario.
[01:11:23] Brendan McKay: The that’s probably not it because then he would have to be living with mom too, which probably didn’t happen in here,
[01:11:28] Nathan Knottingham: but yeah. Bingo. Yep. And that’s where we’re just
[01:11:31] Josh Lewis: going. Orlando just followed up with a clarifying point. He says he’s a hundred percent, so he’s going to be exempt. So absolutely fine all the way.
[01:11:41] Nathan Knottingham: And then you just hit it. You just hit it. He’s got to live in the house. VA is a primary residency purchase
[01:11:47] Brendan McKay: low. No, but what’s most likely happening in Orlando scenario is east coast signing on a conventional loan. That is those bombs taken out is this is what I would bet has happened in not using as VA eligible.
[01:11:58] Brendan McKay: But Orlando, let us know if, we’re assuming incorrectly. Cause if you have, if you’re just trying to co-sign without living in the house, then you can’t use your VA loan at all.
[01:12:08] Josh Lewis: Matt, we’re
[01:12:08] Matt Burkhead: rolling. I wouldn’t have mentioned too, on the funding fee. If you are a purple heart recipient, you would be exempt even if like you’re active duty, for example and not receiving any disability,
[01:12:21] Josh Lewis: I’ve never had this man.
[01:12:23] Josh Lewis: Have you ever had one of those with a purple heart? I’ve never had one. I want to know
[01:12:28] Matt Burkhead: how is it documented? So on the certificate of eligibility, it said exempt a purple heart or something to that effect because I asked him about, I said, oh, you’re exempt because you have a pro bar. He’s I never told you I had a purple heart.
[01:12:41] Matt Burkhead: I was like, oh, it’s on your certificate.
[01:12:45] Josh Lewis: No, when they changed that guideline and when it popped up, I’m like how, would you know, who do you have to reach out to VA and ask and get something in writing to confirm? It’s cool. It’s on the COE. Yeah. So
[01:12:53] Nathan Knottingham: we got lots more questions. Pop in,
[01:12:56] Josh Lewis: started this at
[01:12:56] Brendan McKay: nine o’clock.
[01:12:58] Nathan Knottingham: I’m thinking just being on for an hour. Really? Probably a really, probably got us going, but I love this one question that pops up is that have you, I should show it. Shouldn’t I get smart. Yeah. Have you guys seen an effect from the wide-scale corporate purchases of single family homes? There’s so many articles about the black rocks of the world buying everything up.
[01:13:19] Nathan Knottingham: Oh man.
[01:13:21] Brendan McKay: I like, I can’t tell you anecdotally where I felt the impact of it, but I know that I have I don’t know. Who’s buying the houses that my buyers are not getting, and I’m not saying all of them are, corporate buyers, but I know some of them are honestly, probably less so in my market than some others, just because of the price points and stuff.
[01:13:41] Brendan McKay: I was looking at some stuff in Jacksonville earlier today and, saw the one that got bought up by a company out of Canada. And like I do believe it’s, a very real problem that needs to be addressed. Absolutely.
[01:13:56] Josh Lewis: And it really depends by market. Matt, I don’t know how much you’re seeing out in, in, in your market.
[01:14:00] Josh Lewis: It’s a hot market, but for us in Southern California, it’s not an issue at all in Southern California, because what they’re looking for, what the corporate buyers are looking for is the lowest price with the highest rents. So we have high rents, but our rents aren’t that high relative to the purchase price.
[01:14:15] Josh Lewis: So they’re just not going to invest that amount of money. Is that any different out in the Phoenix Metro map?
[01:14:23] Matt Burkhead: Traditionally the Phoenix market has been the promo prices have been fairly low and then now the rent’s really skyrocketed, but also the values have gone up. I think there’s definitely a fair amount of corporate buyers in the Phoenix and just Arizona, mark.
[01:14:39] Matt Burkhead: But I don’t know, really know how it compares to like the rest of the country, to be honest.
[01:14:44] Nathan Knottingham: Yeah. That’s a tough one. There’s a, here’s a one. I like this one. And Matt, I’m gonna throw it to you first. Is it really still possible to close with no money down with a VA loan?
[01:14:55] Matt Burkhead: Yeah. So there’s no down payment required on a VA loan, but what does get confused a lot of times is the fact that there’s no down payment versus no closing costs as well.
[01:15:07] Matt Burkhead: VA loans have closing costs just like any other loan. We went over a lot of those on the loan estimate. So those still have to get paid by somebody. It may not be yourself paying those, but somebody is paying those, whether it’s doing a slightly higher interest rate for a lender credit that goes towards paying the closing.
[01:15:26] Matt Burkhead: For maybe get a seller credit that goes towards closing costs, right? Somebody is paying those closing costs. Whether it’s yourself
[01:15:35] Brendan McKay: or someone. Yeah. And a lot of times I’ll, be talking to somebody that the last time they bought a house might have been 10 years ago and they saw, I just want to roll in the closing costs and you absolutely cannot do that on a purchase.
[01:15:47] Brendan McKay: Other than if you’re increasing the rate, which is not really rolling them in. And, what most likely happened with that person 10 years ago is that the seller paid for the closing costs because it was a buyer’s market. It is not a buyer’s market right now. And this is not really a reasonable expectation to go into it in a buyer’s market where you can get the seller to pay for closing costs in some markets.
[01:16:08] Brendan McKay: Then, you can get into it with actual zero down or zero out of pocket. But that is not, that’s not the world we live in.
[01:16:14] Matt Burkhead: Really, the only time I’ve seen seller credits on loans is where someone’s planning on paying the closing costs themselves and the appraisal comes in higher. So say the purchase price is 300,000 principle comes in at 310,000, they do an addendum for 310,000 raised loan amount. And the purchase price then asked for 10,000 in seller credit. That way the seller is walking with the same amount of money, but you’re getting $10,000 credit towards the closing costs
[01:16:44] Brendan McKay: or something comes up on the inspection. But yeah. Yeah.
[01:16:47] Josh Lewis: And that question, that misunderstanding that question in terms of the moderators, having to deal with it, there’s rarely a squad day that someone doesn’t post a question or is adamantly insisting that they were able on the purchase to roll their, costs into it.
[01:17:01] Josh Lewis: It’s just a common misconception that as moderators we’re constantly dealing.
[01:17:05] Nathan Knottingham: It’s calm. If it come on, if I’m gonna play the devil’s advocate, because look, this is a discussion let’s just consider our, so let me be the one who’s going to throw this out there. What, how is it different if I’m rolling in the closing costs?
[01:17:16] Nathan Knottingham: If I said, Matt, give me an interest rate with that has at least a net zero, right? I want all the rebate back so that I don’t have to come to the table with, cash. Sure. My payment goes up because my interest rate is higher, so I want to pay for it, but that’s an option.
[01:17:35] Brendan McKay: It is. That’s just not really what the term rolling it in means rolling it in means like if you have a hundred thousand dollar loan in $10,000 in closing costs or a hundred thousand dollars purchase price and 0% down and $10,000 in purchase, I’m sorry.
[01:17:50] Brendan McKay: Closing costs that you would have a loan amount for $110,000 back camp that can be done on a refinance, but not a purchase. It’s also, maybe in some markets it’s very difficult to build in a lender credit, fat enough that it covers all of the closing costs and escrows in at least in all of the markets that I’m active in.
[01:18:09] Brendan McKay: It’s not really a viable.
[01:18:11] Josh Lewis: We again with high purchase prices here in California, Southern California, specifically, we generally can closing costs are low. Prices are high, so we can generally do it. But Nathan, to answer your question, the difference, if you’re truly rolling it in and just adding it into your loan amount, here’s where the difference is.
[01:18:32] Josh Lewis: If you sell three days after you buy it, you’re upside down. You’ve lost that money. You’re not getting it back. If it’s added to the interest rate and you get that lender credit, cool sell a month later, you’ve lost nothing. So it’s a better way of doing it versus rolling it in. And that’s the reason why the VA doesn’t say we’re already.
[01:18:49] Josh Lewis: If you go to zero down, allowing you to finance that funding fee where you’re 1 0 2, 103 almost 1 0 4. If they let you roll closing costs, then they’re going to have a hundred, 506% loan to value loan, or it’s going to be once you get to a more normal market, two to three years before you’re even looking at equity.
[01:19:06] Nathan Knottingham: Spot on. That’s good. And, that’s one where it’s I just get nervous when I hear that. We’re just like, no, you can’t do it. People sell it different ways. And I know we just have to overcome that a little bit. And
[01:19:19] Matt Burkhead: a lot of it can be just the minutia on the wording. Because it can, to someone that’s not in the industry, maybe it could seem it’s all the same thing, but there are minor differences that I think are important because they do impact the total process.
[01:19:35] Matt Burkhead: Yeah.
[01:19:35] Nathan Knottingham: So Melinda asks when we’re doing this again, we’re going to, we’re planning on doing these every Tuesday night, starting about 7:00 PM central. We’ll give or take a little bit, and then Josh, thanks for pointing that out. I did. I skipped over one and here it is. The question was, why is it that some lenders don’t want to deal with a VA loan at the
[01:19:52] Josh Lewis: moment?
[01:19:53] Josh Lewis: Nathan don’t didn’t vet at VA write a whole, a 50 page white paper, partially about some of this of why people are looking down at VAR.
[01:20:04] Nathan Knottingham: Yes. And you could find it the group you can find on dot com. We’ll drop a link, but where that all started from was in November Dave Ramsey, there was an ask Dave column that came out and it was a veteran saying, I want to I’m in my parents’ house.
[01:20:19] Nathan Knottingham: I want to buy a house. I’m going to use the VA loan, but I’m having trouble saving up money. And the whole position was at the VA loan as zero down percent was a position of weak financial weakness. And I cannot tell you how angry that made me because debt is not financial weakness. The ability to borrow money and make a monthly payment while still saving your nest egg for the, oh no, the sewer backed up two months after I bought this and it just cost me $5,000 to dig it up and replace it.
[01:20:50] Nathan Knottingham: That’s a financial strength position. And so this whole white paper started from that arguing that point. And then we wanted to give something that said, look, here’s the facts and math and data for. Let’s dive into this, but that’s my opinion. I
[01:21:04] Matt Burkhead: think that in terms of lenders not wanting to do VA loans, I would think that it’s really just a lack of knowledge on their part, because if someone does have a loan officer doesn’t understand the VA loan, they might shy away from it just because it’s something they don’t know.
[01:21:22] Matt Burkhead: But VA loans are really not harder than any other types of loans. As far as sellers, maybe not wanting to accept VA offers, I think while there may be some reasons to not accept a VA offer over conventional, I would say the vast majority is just from misinformation or outdated information about VA loans.
[01:21:43] Matt Burkhead: That’s just
[01:21:43] Brendan McKay: not accurate. Yeah. I, if a lender doesn’t want to do a VA loan, then you should find another lender. Felines are amazing. I love doing VA loans, frankly. They’re easier. The guidelines are easy. That then not be alone. And I, and there definitely in, in the consumer’s best interests, the overwhelming majority of the time compared to the other option.
[01:22:04] Brendan McKay: And to that
[01:22:04] Josh Lewis: point, Brendan, I don’t know that there’s another loan as flexible in terms of the guidelines are there as guard rails. And if you can make a strong case for the veteran and you have a lender and the regional home loan center behind you, that will see it in the veterans favor. It’s like the only one that you can go outside of the lanes of a guideline, Fannie Mae, Freddie Mac FHA.
[01:22:27] Josh Lewis: It’s no, this is what it is with the VA. We have options for seeing things in the borrower veterans.
[01:22:35] Nathan Knottingham: Which is why we test and go by the handbook, because that was the root core of the argument and the structure. And then we, if you can argue from the handbook and a lender has an overlay and you can get them to understand like, look, you’re overly stupid.
[01:22:48] Nathan Knottingham: Here’s why. Yeah, I honestly, it was two weeks ago, I’m talking to a lender and I had one of our vet VA professionals calls me out of branded wooly calls me up and he’s man, I cannot get this lender to listen to this. They want a WVU, a verification of employment from, it was dumb. And I was like, huh.
[01:23:07] Nathan Knottingham: So we got on the horn with the lender and I’m like, look from, the handbook to the certification of their job, to how it all lays out here with the letter of explanation they’ve already done. We think your underwriter is actually putting a burden on the veteran that does not have. And the lead government underwriter looked at it and goes, no, this makes sense.
[01:23:26] Nathan Knottingham: We would totally do this. Okay. I’m sorry. We’ll fix it. Bam. We were closed and on time and it’s going back to the handbook and saying your overlay doesn’t make sense. How do we do this? And move forward with the VA handbook is one of the most brilliant things ever when it comes to serving a veteran from a professional that well, the
[01:23:47] Nathan Knottingham: it’s not brilliant, but it’s a place it’s the same place that you started an argument from that nobody else can deny you that location from starting that argument, right? You start your battle from a secure. One of
[01:23:58] Josh Lewis: the other interesting things about the VA handbook versus the FHA and Fannie and Freddie is it’s shorter and vaguer.
[01:24:07] Josh Lewis: So we say it’s not as black and white. There’s lots of areas where, what they don’t say is as important as what they do say. And if you look at it as a broker, as an, the loan originator, as a lender, it’s easy to go, oh, they won’t allow it. Or that seems to imply that they won’t yet you pick up the phone and explain the situation, which is not easy.
[01:24:25] Josh Lewis: You’re going to wait on hold for awhile. You got to get to the right person to ask the question and get it documented. But it’s the only one that has a lot of space for interpretation relative to the other types of loans.
[01:24:37] Nathan Knottingham: Can I share one thing here too, which I think is I’m going to brag on our veterinary professionals.
[01:24:42] Nathan Knottingham: Again, the realtors you find in this group, the agents, the real estate agents, the realtor. They know more about the VA lender handbook than many, loan officers out there, because we send everybody through the exact same test and they have they at first, it’s funny when, an agent comes in Hey, I want to get vetted and go through the process.
[01:25:05] Nathan Knottingham: They were like, all right, we’re gonna test you on the handbook. They’re like, why? Like, how does it, how does that affect my job? And by the time they’re done, I’m just gonna throw out a name. Cause she, may not be watching, but Alexis Brown literally, like she can find an answer. Oh, did she? Yeah. Alexa tizzy.
[01:25:21] Nathan Knottingham: She could find an answer faster than anybody. And one of our agents struggled the hardest on the first test. I’m not going to call her out, but she, fought through that test of what she got it. Oh my gosh. She knows that handbook inside and out. And I have now heard stories over the last two years of her going head to head with lenders going, no, you can’t do that.
[01:25:39] Nathan Knottingham: Here’s why, no, you can’t do that. And here’s why so having the right professional on your side during the transaction is key and. I wouldn’t trade it for the.
[01:25:51] Josh Lewis: And, honestly, how many times do we see in the comments? Probably multiple times a week. Hey, I got approved. My lender said, everything’s great.
[01:25:59] Josh Lewis: And I go in and talk to my realtor and she told me we can’t get a VA offer accepted. So it’s not just someone like Alexis who truly knows the guidelines and can fight on stuff like that. It’s just being able to present to the listing agent, why is this a good risk and going back. So the question was why the lenders not wanting to do VA financing and someone pointed out in the comments that it’s really the, listing agents and the realtors that don’t want to deal with it.
[01:26:25] Josh Lewis: And as Matt said, it’s primarily misconceptions around the appraisal, the repaired. And the closing costs that stuff’s all out of date. So your realtor is really the primary contact with the listing agent. So if they’re not up to speed on that, like I can know it like the back of my hand, Matt and Brendan can, it doesn’t matter.
[01:26:44] Josh Lewis: We’re not the ones on the frontline presenting the offer and talking to the listing agent, making sure they understand
[01:26:50] Brendan McKay: You need an advocate. There’s just, there’s no doubt about it. When, I hear that it’s, one of those things. Can it be sometimes more difficult to get a VA offer more accepted?
[01:26:59] Brendan McKay: Yes. Is it impossible? Absolutely not. And is your best interest to use your VA benefit? No doubt. I’m in one of the most competitive markets in the country and we’re getting multiple buyers under VA contracts every single week. So it’s happening if it’s happening here, it’s possible in your market to
[01:27:18] Nathan Knottingham: absolutely.
[01:27:23] Brendan McKay: There was one, question I noticed that we missed and it’s one of my favorite question. It was 10. Can we use a VA disability income, a VA disability as income? And the answer is not only yes, but it counts for more because your disability income is tax-free and the way debt to income ratios are calculated.
[01:27:43] Brendan McKay: A debt to income ratio is really the main number that’s used to determine. And how much of a home you qualify for, or how much of a payment you qualify for. And it’s, done on gross. So it’s done on, for number normal, like wage income before it’s taxed. So if you’re taking a dollar of tax-free money, that’s worth more in the guidelines account for that.
[01:28:02] Brendan McKay: So you can gross it up by 25%. So if a hundred dollars of VA disability is worth $125. When it comes to qualifying, we’re a hundred dollars of a, my W2 income is a hundred bucks.
[01:28:19] Josh Lewis: And it’s also the easiest to document. Matt had mentioned the perf the purple heart shows up on their certificate, the eligibility it says right there, Hey, they get $3,285 a month. So there’s no tracking down proof that they’re receiving it. The VA is kind enough to tell us right there on the COE.
[01:28:34] Nathan Knottingham: That’s awesome. Wow. We covered a lot of ground. I love it. This is awesome. Yeah. So we’ll do these a we’ll use Tuesday nights. I put some links in there in the chat, so I need to go into the other places where this is living and maybe put these links in here as well. Debunking VA myths, white paper, et cetera.
[01:28:55] Nathan Knottingham: So what else we got Josh?
[01:28:59] Josh Lewis: Not a whole lot. That was a it took us what, 30, 40 minutes to get through the the cost. And then we had some, questions here pop up. But hopefully once everyone starts realize every Tuesday some people that you saw Orlando was happy to have this question answered live.
[01:29:13] Josh Lewis: Some people do just want to put it a little more low key in, a text in the message into the group. But this way you don’t have to deal with with moderators. You just have Nathan approve your comment. And w we get three, four foreheads here to to answer your question live at one time. So it works out pretty well.
[01:29:32] Nathan Knottingham: Absolutely. All right. I think Matt’s gonna fall asleep, so we better wrap this one up.
[01:29:39] Josh Lewis: It’s not even late for Matt. Frederick is the only one that hasn’t
[01:29:44] Brendan McKay: 4:00 AM on the fly.
[01:29:48] Nathan Knottingham: Probably does. I love it. All right, so there’s 10 more questions next time. I love that.
[01:29:56] Nathan Knottingham: Yes. Yeah, it was Belinda Melinda, you get the award w awards of badges, I think will give you the award for most questions, asked it on our first VVA live. Thank you for that. That’s amazing. So
[01:30:10] Josh Lewis: We’ll, get it promoted for next week. We’ll be back Tuesday. Do you, Nathan, do you know what, squad we have on duty
[01:30:15] Nathan Knottingham: next week?
[01:30:16] Nathan Knottingham: You know what? I was counting the wrong way because we have eight squads, so they always rotate. And so I’m going to the next squad, which is echo w it goes backwards. It Charlie’s the next squad. Yeah, Charlie’s gonna try. It’s messaged me later. I might
[01:30:32] Brendan McKay: have, Nope. Charlie will be almost as good as Delta, so it don’t worry.
[01:30:36] Brendan McKay: You won’t be disappointed for next week,
[01:30:39] Josh Lewis: but no, we will look forward to it. We’ll get a good topic. We’ll get a couple more VVA fives and pick their brains and hopefully just keep sharing information. In addition to answering questions.
[01:30:50] Nathan Knottingham: Absolutely. Thanks guys. Appreciate it. Josh. You got any last words for us?
[01:30:56] Josh Lewis: No, just again we, always like to end this as it is brutal out there, like you said, remain positive, remain upbeat. I’m not a super woo person, but I do happen to notice that my clients who are positive and can keep their head up, even when a couple of doors get slammed in their face, they seem to be the ones that get the offers accepted sooner.
[01:31:15] Josh Lewis: The Debbie downers, they either end up quitting or it’s just a really long and laborious process. So keep your head up, do the right thing, pick some solid professionals on the real estate side, the loan side, and and go out there and get a house.
[01:31:30] Brendan McKay: That’s what Josh has the psychiatrist couch behind him.
[01:31:32] Brendan McKay: He said
[01:31:33] Josh Lewis: yeah,
[01:31:33] Josh Lewis: exactly. That’s for me, that’s for underwriters,
[01:31:39] Brendan McKay: but yeah, and like that, to that and lean on whether it be, Hey man, are really frustrated. I, it sucks to be told that you didn’t get the house like that is not feel good. Feel free to post about it. Now, if you’re just ranting and raving that you might just get a kind message from the moderator saying, I empathize, but we can’t make your posts, but at least have something.
[01:32:01] Brendan McKay: So feel free to vent. And w we’ll help absorb from the bloods for you.
[01:32:09] Josh Lewis: All right. We’ll leave Brendan with the the last final words there and hope to see you guys back next week, prepare with your questions. So that Melinda is not the not the only one throwing them at us.
[01:32:19] Nathan Knottingham: I love it. All right, guys. Have a good night, sir.
[01:32:22] Brendan McKay: Thanks.
[01:32:22] Josh Lewis: Y’all.