Unlocking Mortgage Secrets: Tips & Advice from Expert Sean Zalmanoff

Arnold: 00:00:00

Fannie and Freddie Mac. You could get Jumbo VA balloon. Have you met USDA FTHB too? All are available here in the Loo. St. Louis in Tune.

Sean: 00:00:12

It's a great ride. You should do our advertising for us.

Arnold: 00:00:24

Welcome to St.

Louis in Tune and thank you for joining us for fresh perspectives on issues and events with experts, community leaders and every people who make a difference in shaping our society and world. I'm Arnold Stricker along with co host Marcus Langstonis. Mark Langston.

Mark: 00:00:40

That's right. Backwards. Not Scannel crown.

Arnold: 00:00:43

I know you love that. Do you ever sign it backwards?

Mark: 00:00:47

Oh, no, I can't, I can't.

Arnold: 00:00:49

My mom used to be able to write backwards. I was like, how do you do that?

Mark: 00:00:54

She's smart.

Arnold: 00:00:55

She must have been bored in school and just. I'm going to start writing my name back.

Mark: 00:00:58

Smart. That's smart.

Arnold: 00:00:59

Yeah, she was. She was very intelligent.

Mark: 00:01:01

All those wires in her head were together. They were.

Arnold: 00:01:04

They were. Okay, folks, we're glad that you joined us today. You can listen to previous shows @stlintune.com.

please help us continue to grow by leaving a review on the website. Apple Podcast or your preferred podcast platform.

Our return to Civility today deals with something that is important, especially for those new business owners out there. Patronize a new local business and if you like it, tell the owner. The first 60 days of a new business are so important.

Simple words of encouragement from a local patron can fill an entrepreneurial owner with enough energy to make it through another risky day.

Mark: 00:01:42

Yes. Amen. Can I say amen?

Arnold: 00:01:44

Absolutely.

Mark: 00:01:45

Put your hands in the air. Amen.

Arnold: 00:01:47

That's right.

Mark: 00:01:47

That is true.

Arnold: 00:01:48

Yeah. Do jazz hands if you want.

Mark: 00:01:50

I know you got to. That's great.

Arnold: 00:01:51

Except if you're driving. Don't do that.

Mark: 00:01:52

I know, I know. Could you ever. Can I could. Would you ever do like a restaurant? I feel so. I feel. I don't feel bad.

I don't feel bad, but I feel for the owners of restaurants because they are there. The ones that I know, they're there all the time, every day, almost 24 hours a day.

It's like they wake up, they go into the restaurant and they go home and they go to bed.

Arnold: 00:02:14

It's your life. And if people say, oh, I've always wanted to own a restaurant. No.

If you've never had any business in that industry, you have no business being in the industry.

Mark: 00:02:25

Yeah. So take care of those mom and pop businesses that are out there.

Arnold: 00:02:28

Yeah.

And if a new place opens up and it may not Be that they might be struggling with service or taste a little bit, Give them a little leeway, give them a couple more weeks, come back, be nice, swing back through, be kind. Yeah, it's about time then. If it still is not up to snuff, I'll just leave it right there.

Sean: 00:02:46

It's really hard to staff for restaurants and the labor in restaurants, it's just been pillaged since COVID with factories and warehouses and stuff paying so much more. I have a couple friends in the.

Arnold: 00:02:57

Industry, and it's tough.

Sean: 00:02:59

They struggle with staffing.

Arnold: 00:03:00

That third voice there was Sean Zalmanoff. He's our guest this morning. So he speaks from a. He's a business owner, but not in the restaurant industry.

So patronize a new local business and if you like it, tell the owner. So this owner sitting across from me, he's been in the mortgage business for what, 24 years?

Sean: 00:03:22

23.

Arnold: 00:03:23

Yes, 23. Wow. How did you get started in the mortgage industry?

Sean: 00:03:28

So it goes back to my time at Mizzou in good old Columbia, Missouri. And I, I graduated in the winter of 00. And so I had the pleasure of working. I worked in a bar and restaurant, fantastic place called Willie's.

And as all my friends were coming back during football season and I was interviewing for jobs, they would all ask me how much money I made and tell me how terrible it was in the real world. And they said, you make more money and your life's better. Don't go get a real job. Still get it.

Arnold: 00:04:05

Stay in an unreal job.

Sean: 00:04:06

So stay bartending and managing a restaurant. I became a professional job interviewer. I think I got, I had a goal of 100. I got into the 60s of job interviews.

, so: 2001

s, early: 2000

Lots of kids that were in school, their parents had money or on paper they did, and they were allowed to spend a lot of cash. And all of a sudden it all evaporated overnight. And I was like, I guess I should actually think about doing someone else. And.

And this guy comes into the restaurant again and he's sitting down, he's Seanie Are you ready? Take me up in this offer. It's fun, it's great. Mortgages are awesome. And so I was like, I'm ready, but I can't do it in Columbia, Missouri.

I need a new start. Lived in St. Louis all my life until then. He had an office in O'Fallon, Missouri, that a friend of his ran.

And I went and I worked there, and I was there for about nine months. And if you could imagine every single thing wrong with the mortgage industry, this company ran it. So we had kids in the back.

So this is before the do not call. This was, like, just coming into play. We had kids in the back. Literally. They rip pages out of phone books.

And then they would just start calling them. Because after the tragedy of 9 11, stock markets collapsed. And usually when the air comes out of the stock market, interest rates go down.

Inflation's the arch enemy of mortgage bonds. There was not much inflation going on. Inflation is the arch enemy of all fixed rate instruments.

And so when the inflation was going down, rates just plummeted. So tons of refi. So they could literally just call people out of the phone book. And it was an interesting place. I learned a lot.

But if kids got out of high school, they came in the back, they ripped these pages out of phone books, they filled out these lead sheets. Then we called these lead sheets back.

I remember the transformation one day when somebody was like, hey, what if instead of just filling out the lead sheet and handing it to us, what if they transferred the call to us? Concept, new live transfers. But it was just, the rates were high, the fees were high. Everything was terrible about this place.

And once I realized that, I talked to a couple buddies, and I almost started a company where I was just going to charge a flat fee at this time. Now we call them loan estimates that are given to review your numbers. At this time, they were called good faith estimates.

s like, I could charge people: 1000

We charged at this place, I was like, I could have saved people $5,000. I was like, it would have been a great deal to do this.

Mark: 00:07:13

Wow.

Sean: 00:07:14

And then I started to realize that every other company wasn't like this boiler room operation that I was working at.

Arnold: 00:07:20

It wasn't a broad brush statement about the industry.

Sean: 00:07:23

Yes. Still, the mortgage and real estate industry is an interesting place. You got to do your homework on who you choose.

Because unlike the restaurant industry, you Make a fair sum of money for every transaction you close. And so who you work with definitely matters. And it's always going to attract an element of unscrupulous people.

Arnold: 00:07:46

So Sean is the founder and chief loan officer of Better Rate Mortgage. And Sean, so what happened after that? You go to work for somebody else?

Sean: 00:07:55

I went to work for somebody else for a short time and then somebody came and offered me a management opportunity to open my own office. I just, I had good success out of the gate. Some of it was talent, some of it was timing. You need a little bit of both.

And that gentleman also, he was interesting to work for and a few, maybe I worked with him for about a year. So there's a lot of people that I worked with in the past who aren't allowed to originate loans anymore. And it's this guy. Anyway, he taught me a lot.

Good or bad, he taught me a lot. And at that point I realized it was time to do my own thing. So I opened a little mortgage brokerage company called Monster Mortgage.

And we created all these like mortgage monsters. And then we had a theme of things that they did. And then the Great Recession happened.

And it was at that time what many thought was the end of days of the independent mortgage company were upon us. And so I had another opportunity. I was having a lot of success and I had an opportunity, opportunity to roll my company into another organization.

And, and that was that place taught me a lot. It was a really good company. It was very entrepreneurial. I started there with one other person.

Over the course of 13 years and a month, I grew it to over 70 people in my region. I was running offices in five states and towards the end I hated it.

hey're happy. And by the time: 2022

Before: 2020

Arnold: 00:09:48

Wow.

Sean: 00:09:49

And so as I'm managing these loan officers and at this time I owned a coaching business to help loan officers as well too. And they were all asking me, like Sean, can I continue to close 15 loans? Are a lot of people who are closing three or four loans a month.

And it's you can, but you need five times the amount of referral partners because this gift that we've been given with very low interest rates is going to dry up. There's no way we continue to close this amount of business. And so many of them, most of them didn't listen.

And they were sad when their turn times were long because the industry, because there was just too much volume going into it. And then they were sad when they didn't listen and they weren't making as much money.

And so it was the summer of 22, and I was on vacation in the Pacific Northwest, and I had offices in Maine at the time, and I needed. I was supposed to travel across country. I was supposed to be there for a week and then leave the family there and then go to Maine.

And if you've ever tried to travel from the Pacific Northwest to the Northeast, it's a day of flights at a minimum. And I think I needed three flights to get there. And I sat down on the dock and I just did the old scientific method.

Everything I liked about the industry, everything I didn't like about the industry. And the number one thing was I really enjoyed helping people buy houses and figuring out their problems or solutions to things.

And number two was breaking bread with Realtors because there's a lot of cool agents out there. There's a lot of uncool agents, too, but you get to pick who you work with.

Arnold: 00:11:19

Right? Right.

Sean: 00:11:20

And I didn't do any of that anymore. And I'm an economics nerd. I'm not. I'm an economics nerd.

And so I was supposed to go to Maine and give a presentation for 50 realtors they wanted me to give a presentation for.

And because of my experience in the coaching world and filling a room, I gave them a really specific formula of how to get a lot of people in the room. They had one person signed up for their event.

Arnold: 00:11:45

Wow.

Sean: 00:11:46

So I was like, canceled the trip. I went home, I wrote a business plan, and a few months later, I resigned from my position.

And I opened up a mortgage company that could deliver closed loans at a cost that most people can't open their doors for.

Arnold: 00:12:06

Wow.

Sean: 00:12:07

And one of. One of the things that I really focus on a lot is there's a interview I saw with Bezos, I don't know, maybe a decade ago.

And they were asking him, they were like, jeff, what are you guys doing at Amazon to prepare for changes in the future that are going to happen in 10 years from now?

Arnold: 00:12:28

Great question.

Sean: 00:12:29

And that was exactly his answer. But like a true politician, he was like, that's a great question, but that's not the question we ask ourselves the most.

He said, what do we do the best right now? And how can we continue to be the best in that in five years from now.

And one of the really cool things with the mortgage industry is technology has advanced so much. Ten years ago, 15 years ago, if you wanted the best technology, you had to build it yourself.

Or it was only given in these enterprise contracts for two or three hundred people.

Now anybody can buy any technology that they want at maybe somebody pays 20% less if you buy 200 seats, but not enough where it moves the needle for the cost of a consumer. And so it really leveled the playing field with the advancement of technology.

And then in just the past couple years since I've opened the business, what AI has done for our ability to make things easier has been awesome, both on our end, a consumer end, and a cost endpoint. And have you ever seen those things online? It's like cheap, fast and easy. You can't have all three, right?

In the mortgage industry, if you don't understand you need to be cheap, fast and easy, you're dead. Because, like, my business is a commodity and I am amazing at what I do. I don't think there's anybody better doing loans than what I do.

Arnold: 00:13:55

But he's the mortgage man, folks.

Sean: 00:13:57

But if I'm a quarter point higher than everybody else, you're going to suffer through some pain, right? To go somebody somewhere else. Every eighth of a point on an interest rate is about $7 a month.

You know, if you've got a $400,000 loan and you're a quarter point higher, do the $6 higher, you're a lot more expensive than somebody else. 50 bucks a month is. That's a lot of money that adds up over time.

And a lot of companies, they're a half point higher, three quarters of a point higher. And so you have to be able to design a business that is going to be cost effective today and profitable. And what I did is I just. And I was.

One of the problems at the old company, people like me were there's companies that they have loan officers and branch managers and regional managers and regional executives and corporate executives and then. And then shareholders. And all of this really means that consumers pay more.

Arnold: 00:14:48

Too top heavy.

Sean: 00:14:50

Very much too top heavy.

Arnold: 00:14:52

So, you know, I've got my gazillion list of questions here.

Mark: 00:14:57

I got a few too.

Arnold: 00:14:58

Yeah, go ahead, Mark.

Mark: 00:15:00

No, my head is spinning a lot. No, no, Best. I don't know. Let's just go. I want to know best terms, length of terms. I've looked at 10, 20, 30 years.

Even in California, they're doing 50 year terms. I can't imagine a 50 year term for buying a house.

Arnold: 00:15:16

That's crazy.

Mark: 00:15:17

But houses are much more expensive. And whatever happened to fha?

When I was a young kid trying to get started buying apartment buildings, I managed to get my very first loan was an FHA loan, $3,000 down and I was in. But you can't do that anymore.

Sean: 00:15:33

No, that's not true.

Mark: 00:15:35

Oh, good, good talk about the different.

Arnold: 00:15:37

Kinds of loans because I bet Souped mentioned them at the beginning of the show.

Sean: 00:15:41

That was rhyme too. I just want to give you credit.

Arnold: 00:15:43

Thank you.

Sean: 00:15:44

So FHA loans still exist and one to four family.

So if you can buy a four unit apartment building with three and a half percent down and as of November of 23 to do a Fannie Mae Freddie Mac loan that the conventional loans that people hear about used to need 20% down to buy a multifamily conventional loan and you only need 5% down now.

Mark: 00:16:10

Oh, is that right?

Sean: 00:16:11

Yeah. So it's become a lot easier to actually buy those home. Prices are up and interest rates are up. So easier is a relative term.

But from a qualification standpoint, from a down payment standpoint, it's easier actually to get into those loans that you can do with 3.5% and 5% down.

Mark: 00:16:30

I think it makes a difference on getting people started.

Arnold: 00:16:33

Oh, absolutely. Yeah.

Mark: 00:16:35

Maybe not the guy or gal that's been in it for years, but someone just stepping into the market, first house, first apartment building, they're going to live in one of the units, whatever it might be.

Sean: 00:16:44

And the cash flow matters.

If you're 45 and buying a multifamily to live in, or if you're 25 and buying a multifamily to live in, the rents matter a lot more as far as what they are at 45, because at 25 you have so much more time for rent appreciation to go up.

Mark: 00:17:02

Yep, works in your favor.

Arnold: 00:17:05

I'm amazed that people don't know about first time home buyer loans. I never knew about the USDA thing. I'd never heard of that before.

But a lot of people walking around who want to buy a new home, they've never owned a home. They don't know about this particular kind of loan.

Sean: 00:17:19

Yeah, the USDA loan. And yes, we're talking about the same thing that they stamp beef with usda. It's a beef loan, but it's not a beef loan, it's a home loan.

And so in, in rural areas you can, you can buy a house with no money down. So it's similar to the VA loan, which. The VA loan, we can talk about that in a little bit. That's hands down the best loan on the planet.

But in rural communities, and you can actually go to USDA's website, you can put in an address and it'll tell you if it falls into it. But can we go back and talk about that 3.5% and 5% down a little bit more?

Because one of the things that I despise about my industry is so many of the people that do what I do, they're order takers. And so somebody comes in and they're like, I want to put 15% down, I want to put 20% down. And, okay, here's your loan.

And with interest rates being higher than people are used to, or I guess at this point, people are used to these sixes and sevens.

But when you're spoiled with twos and threes for a while, which being in the mortgage industry, y'all, I pray every day that we never see 2 point something percent on a mortgage again. And people always ask me why?

Because the calamity of events, we're going to need another global pandemic and we're going to need some government missteps of buying way too many bonds that drive rates down, that are going to create bidding wars on houses that are going to make prices go up 20 or 30% a year again. And we saw exactly what happens when rates are that low. And now with even less inventory in the market, we don't want that to happen.

You don't want that to happen, even if you're out there shopping right now and you're like, I wish I had a 2% rate. You don't, because then everybody else does. And the amount of buyers for the amount of homes, it doesn't work. And so what?

Going back to this down payment side of things, often people come to me, they're like, I have this amount of money to put down. They're 25 years old. They're not thinking about the time value of money.

And the cool thing is, if you get a mortgage today, then 10 years from now, you're still paying with today's dollars.

Mark: 00:19:22

Correct.

Sean: 00:19:23

On that mortgage. So money devalues at roughly 3% a year.

And so 10 years from now, you're using dollars that are 70% of today's value, but you get to pay with them on today's dollars.

So generally, the dollars that we spend, and this is just Econ101, as long as we don't have deflation the dollars that we spend today, they're the most expensive dollars that we're ever going to spend as money devalues in the future. If I can show somebody, oh, you have this credit card debt. We should pay this off, or, hey, let me pull up a compound interest rate calculator.

And let's look at what $30,000 does invested in the stock market over the course of 20 years. Over 30 years. And there's something that everybody needs to know. It's the rule of 72.

has been around since: 1957

It's probably even higher after last year's stock market gains. But even if you look.

If you be a little more conservative and say 8%, if it's going to return 8% a year, and you look at $30,000 invested at 8%, which, again, your money would double in about nine years over the course of time, the earlier people invest, it's the last double that matters. You got 30, then you've got 60, then you've got 120, then you got 240. It's like. And then, oh, wait, and then it's $500,000 on that next double.

And if it happens to be 10%, if it happens to return at what it currently is.

that I talked to in the early: 2000

I know it's scary, but, like, overall, if the markets don't return, we have a lot more to worry about than the value of our houses.

Mark: 00:21:39

That's right.

Arnold: 00:21:39

Yeah. We're talking to Sean Zalmanoff. He's founder and chief loan officer of Better Rate Mortgage. This is Arnold Stricker with Mark Langston of St.

Louis in Tune. Mark, this is a wealth of information.

Mark: 00:21:49

Oh, yeah.

Arnold: 00:21:51

And I remember Sean was saying before the show, what am I going to talk about for mortgages for an hour? We're halfway through now, Sean, and we haven't even gotten. I've only done two of my questions. I have like about 12, so.

Sean: 00:22:03

All right, let's grow.

Arnold: 00:22:04

No, it's fine. It's good because this is important information.

I think that the average person out there, not even the average person, even the above average person, and of the below average person, everybody needs to know.

They are just not aware of all of the intricacies of the importance of getting a really good mortgage and getting it through a loan officer that's going to treat them respectfully and look out for their interests and not try to gouge them. We're going to take a quick break and we'll be right back. This is Arnold Stricker with Mark Langston of St. Louis and Tune. Don't go away.

This is Arnold Stricker of St. Louis in Tune on behalf of the Dred Scott Heritage Foundation.

In: 1857

,: 1868

The Dred Scott Heritage foundation is requesting a commemorative stamp to be issued from the US Postal Service to recognize and remember the heritage of this amendment by issuing a stamp with the likeness of the man Dred Scott. But we need your support and the support of thousands of people who would like to see this happening.

To achieve this goal, we ask you to download, sign and share the one page petition with others. To find the petition, please go to dredscottlives.org and click on the Dred Scott petition drive on the right side of the page.

On behalf of the Dred Scott Heritage foundation, this has been Arnold Stricker of St. Louis Intune. The United States has a strong tradition of welcoming newcomers and refugees.

The welcome Corps is a new service opportunity for Americans inspired to welcome those seeking freedom and safety and in turn, help strengthen their own communities. Welcome Corps is a public private partnership that is inspired by what Americans represent to so many around the world. A beacon of hope and refuge.

-: 9090

-: 9090

This is Arnold Stricker with Mark Langston, we're talking to Sean Zalmanoff founder and chief loan officer of Better Rate Mortgage. And folks, by the way, the mer the word Mercury mortgage is a morphed word of two words that were French for dead and pledge.

So mortgage means a dead pledge. And I've done my history on mortgages. I have a whole thing here. But I figured that would bore everybody.

Sean's more important about listening to than me.

Mark: 00:25:13

Now, before we get into the second half of the show, if you're listening to this, get a pen and paper. Yes, I'm not kidding. I have been making notes as we've gone through the first half and it's hard to keep up, but such valuable information.

Arnold: 00:25:26

So, and this is one reason I love what we do here on the show, Mark, is because we have experts like this within our community to help people understand a lot of these things that look like they're huge mountains. And with the right guide, you can, that mountain's maybe not as tall or hey, here's the pass. We're going to go through the pass here.

You don't need to worry about those things. So big question here, Sean. What are the most important things that people need to do to prepare for a mortgage?

Sean: 00:25:55

Start early. You got to start early. I get people who, they'll be like, hey, I'm going to buy a house in July.

And I'm like, okay, we need to do your application right now in case your credit's not perfect, in case there's some income tweaking, in case you should actually delay a promotion because making underneath a certain amount of money is going to, to let me make an offer to you based upon area median income limits that is going to make your situation better. People are afraid to get their credit pulled sometimes. Well, you're going to have to get your credit pulled at some point.

Whenever we start with somebody, we always do a soft inquiry. It's not anything that negatively affects your credit score. It's a fallacy that it affects your credit score negatively anyway.

One credit pull doesn't really do anything.

But you can't even when we, when somebody does a soft inquiry on your credit, you don't even know that they pulled your credit unless they're showing you that they pulled your credit. And so the earlier you start, the better prepared you are.

And somebody might tell you, hey, you got perfect credit, you got a low debt to income ratio, you're in the driver's seat, don't worry about it. But if that's not the case for you or there's something that we can do to help make your situation better.

The earlier you start, the better your position is. And it doesn't cost anything to start the process.

Arnold: 00:27:09

So do you talk to people about, hey, you've got like 50 credit cards, probably not a good idea, or how to improve your credit score, pay this loan down, or consolidate your loans, or do you get into that kind of stuff?

Sean: 00:27:23

Yeah, I mean, we get into that. We get into easy tricks to build credit.

If parents have long standing or your significant other, your boyfriend or girlfriend or husband, wife, partner, has, has credit cards that you, that they've paid on time. Like my niece, for instance, her husband was, had no credit whatsoever when we started talking.

And he just, because he's a very responsible individual, not a collection, not a bad credit. He just never opened credit. Early 20s. And so unfortunately, being incredibly fiscally responsible and not opening credit, you can't get a loan.

You're not rewarded for not having credit. Now that doesn't mean you need to go charge a bunch of things.

I tell people, hey, get a credit card and put your Netflix subscription on it, Put your Disney plus subscription on it, and just set it in advance so that automatically comes out of your account every month. And you put that 12 bucks on, there it goes. And it builds credit really quickly.

But some of the things, like with, with my niece's situation, she was able to add her husband as, as a user on her account. And so what happens in that situation? She had an account for five years, low balance, high limit. He instantly inherits five years worth of history.

So we were allowed to plan for that. And it was funny because he did the same thing with one of his parents that they put him on there.

And she had perfect credit and he ended up having perfect credit, but he ended up having a score that was a few points higher than her in less than 30 days. Because of how we were able to do that, right? And so that allowed us to use both their, in both their incomes.

It allowed them to qualify for the exact house that they wanted to buy. And it just made a great situation for them.

Mark: 00:29:14

Sean, what is a perfect score? What would you say a perfect score.

Sean: 00:29:16

Is in the scoring models? Now?

One of, one of the things with mortgage reports, between Transient and Equifax and Experian, those are the three, I don't know, maybe lords of our industry, because it almost seems like you're back in, in times of wars and castles. But they. Between them, there's 50 different plus algorithms for credit scores.

I can't say any of them are really great, but one of the barriers to entry to opening a business is you make it as complicated as possible and then you can't all of a sudden have Mark and Arnold's credit bureau open up tomorrow. And the. In the mortgage world, a perfect score is 850. I've seen 820s. Maybe I've seen like an 830 even.

It's impossible to get a quote unquote perfect score to get the best rates in the market. On a conventional loan, you're looking above 780.

But there's not really much difference above 740 to 780, depending whether you're looking at a VA loan or an FHA loan. The credit score requirements do go down on those loans.

But if you're shooting for what score do I need to have that I can walk in anywhere and get the best rate? 780 is the number, the magical number you're looking for.

Mark: 00:30:32

Okay, good to know.

Arnold: 00:30:33

So what do most people miss in.

Sean: 00:30:36

There'S one that they think that more down payment helps them.

And so again, like, one of the things, like your mortgage person is like a financial planner and really like a great mortgage person is a debt manager. Like if a hundred dollars doesn't mean anything to this person in what they're paying a month.

And so right now, based on interest rates, every $20,000 you put down is going to move the needle in your mortgage payment about $130 a month. So if somebody's coming to me and they're like, I want to put $60,000 down. And I'm like, you could do the same thing with 20 and $260 a month.

Doesn't do anything as far as what your qualifications are or your monthly, monthly cash flow. And again, I should take them. And I'm like, hey, look what $40,000. Never put another penny in. Look what $40,000 equals for you in 30 or 40 years.

Like, you can have a million dollars sitting here, assuming the markets return what they've returned and not change anything with your lifestyle. Or they have this expensive car payment or they have these credit cards. And I'm like, hey, look, we can. You can pay all these off with this, right?

You're going to cash flow X number of dollars better. You can either take that if you want to pay off the loan quicker and pay off the loan quicker, which in almost every instance I advise against.

It's a terrible idea to make extra payments on your loan.

Mark: 00:32:07

Oh, I want to hear that.

Sean: 00:32:10

Again, because today's dollars are the most expensive.

That money, once you put it into your house, it's gone unless you go do a cash out refinance or a home equity line of credit and pay money to access the money that's in your house. If you have credit card balances, the money needs to go to pay those off.

If you're not saving everything you want to for retirement, if you haven't put money in your IRA, if you're not maxing out at least your 401k portion, if your employer matches, that's free money. Even if that money returns 3 or 4% less than, than what you're getting somewhere else.

But if you, if somebody's matching 3% and they're giving you 3% free money, it's free money. You can't beat free cash. If you don't have your 529 plans that, that you're putting in for your kids.

All of those things need to be, you need to be debt free and you need to be maxing out your savings and meeting with a financial advisor to somebody to make sure that all those things are being accomplished. And then once all of that's done, then look at doing putting extra money towards your mortgage.

But it's the last thing that you should pay money to because it has no return. Your house is going to appreciate anyway. Regardless of how much money you put down, the house is going to appreciate at the same amount.

Obviously if you pay down the mortgage more, there's more equity, but it has zero impact on the percent appreciation that you're going to get when you sell.

recently who bought houses in: 2018

And I've taken somebody with a 2 1/2% rate, I've given them a 7% rate on their mortgage and I've showed them how they can pay off their house 10 years quicker because we're taking that money out of the house. Because the other beautiful thing that's happened in a lot of instances are people who bought houses, their value of their house.

If you bought before: 2020

Some houses increased even more than that. And we can take that somebody. So wait, you just told me, took somebody's rate from 2 1/2% to 7% and they can pay off their house 10 years quicker.

took your payments that were $: 5000

You take that extra $: 2000

Arnold: 00:35:08

You really do some.

You educate people with financial responsibility and it's up to them to be responsible then because they can't go back into, well, I want to get that new car, I want to run my credit card back up. They have to be responsible and see the pros and the cons of that.

Mark: 00:35:25

So I don't like home equity lines of credit. Am I right about that? I would rather refinance and take the money out. Can I do that for my house?

Sean: 00:35:35

You can, yeah.

Mark: 00:35:37

Because a home equity line usually is like you pay the interest, but you.

Sean: 00:35:41

Can pay extra money towards printing as well too. It just depends.

Like right now, if, let's say you need a $20,000, a home equity line of credit, they're usually free to a couple hundred bucks to set up.

When you do a new first mortgage, especially if you're doing cash out, you have to have an appraisal, you have to have new title work, you're out a couple thousand dollars.

Mark: 00:36:00

Okay.

Sean: 00:36:01

With where interest rates are right now on a home equity line of credit and where fixed rate mortgages are with cash out loans, you're actually often a lot better off doing a home equity line of credit. And so just so everybody understands where I'm coming from, I refer almost all my home equity lines of credit to local credit unions.

They just do them better than everybody else. I make money when I close first close ended mortgages. So I would make money closing this cash out refinance.

I would make no money doing this home equity line of credit. And so what I'm telling you, it's in your best interest. I just, I like to put those caveats in there.

If I would refer it to somebody else and not get paid to do it, it's in your best interest. If I could do a loan that would actually make money. So it depends on those things.

Now if somebody's looking at a huge line of credit because they need to pay off this debt or do something, then maybe that cash out, refinance. But it really depends on the amount.

The lower the loan amount that we're talking about, whether it's a home equity line of credit or fixed rate mortgage or anything else, the less the interest rate matters, also the shorter the amortization term. People get, get so caught up, it's like on a car that they're paying for five years and it's this is 3% and this is 5%.

I'm like, did you look at the amount of interest you're actually paying? Because the shorter the amortization, the more principal you pay up front right away, right?

And the less the interest rate matters on those things and the less it actually moves the needle on your payment.

Arnold: 00:37:30

I think that's the main thing people look for is what's the interest rate, what's the interest rate? And they ignore many of the other factors that you're talking about. You really get into that with people and say, hey, but have you considered this?

Sean: 00:37:42

There's a lot of lenders out there who, they have the interest rate on the surface is better. And then they're like, ah, but it's three points to get that interest rate rate.

And I'm like, if you paid three points to me, I'd be a half point better. There's a lot of instances right now where we'll actually, the higher the interest rate, I can often credit money back to people.

And so what we'll do sometimes be like, hey, listen, we're at the top of where interest rates are in the market right now and you're doing X, Y and Z with the, with this loan. If somebody was doing a construction loan, I can raise your rate and credit you thousands of of dollars back.

And then you're going to refinance this when it's done anyway.

Mark: 00:38:20

Good.

Sean: 00:38:21

And then so I can save you four or five or I can credit you four or $5,000 at closing and then eight months later, a year later when you're done, then we can actually refinance and save that money to lessen cost. And so it's not just about rate. You've got to pay attention to what the costs are.

And if you're looking at a loan estimate, it's the section AA fees, it's the 800, the section 800 charges, it's the origination Fees that are coming from the lender and what points and fees they are or are not charging you there. Some people get caught up in like the title work in those things.

And one lender might estimate: 1500

It's you're going to pay whatever the title company charges. We're just going to try to get you a good guesstimate to what that cost actually is.

Arnold: 00:39:16

So when should people refinance? Are there certain factors that are more beneficial to refinance than or better times.

Sean: 00:39:25

Or the most of the refinance?

So we had a good period at the end of Q3, beginning of Q4 of 20, 20, 24, rates had, rates were bottoming out where you could get high fives, low sixes on 30 year conventional mortgages. @ that point there was a lot of people that we could save a point on their interest rate.

But what we did with a lot of those people because some of them wanted to pay the cost and get the cheapest rate possible.

A lot of those scenarios though, if the rate was 5,875, somebody's like, I was like, you can take a six and a quarter too and we can literally add zero dollars to your loan amount. And sometimes with these situations, if the rate drops enough where I can pay for the cost on a large loan, that might be a half of a point.

If it drops a half point and you don't have to pay any money, but you save 150 bucks a month, that makes sense. You might also be saving $150 a month. But somebody might be trying to charge you eight grand to save $150 a month.

That probably doesn't make any sense for you to do, right? So it really depends on the recoupment period of that and then again the opportunity cost.

If you have that $8,000 again, what if you invested $8,000 in an S and P index fund? And I just, I keep talking about this S and P index fund because it's like spy. If anybody wants. I am not a financial planner.

I don't do financial securities for anybody else.

Arnold: 00:40:53

That's his disclaimer, folks.

Sean: 00:40:55

I'm not licensed to do this. I don't have any products to sell. But Warren Buffet talks about the S and P index all the time as well too.

It's something, it's 500 stocks, broad based, it rebalances you can go buy the Spy and your Ameritrade or Schwab or E Trade or whatever account you want to. You can go to your financial planner. They're electronically traded funds. They rebalance. And so, so it's a really.

It's about as safe as an investment as you can make. That should return money over time. And again. If the stock market doesn't return money and inherently, as long as we have inflation, things cost more.

The stock market returns money. I could go deeper into that, but it will. But if it doesn't, there are pitchforks and people in the like, we have bigger problems.

We have way bigger problems. So you might as well be in the game.

Like one of the beautiful things that I tell people about the United States of America is like, it's not actually that hard to get rich slowly if you have a conservative approach. If you don't overspend.

If you work with somebody who understands markets and you invest over time, it's not hard to retire and have enough money to take care of yourself.

Arnold: 00:42:16

And the earlier you start, the better.

Mark: 00:42:18

Oh yeah.

Sean: 00:42:19

Oh yeah.

Mark: 00:42:19

Yep. Heard that all the time.

Arnold: 00:42:21

Yeah.

Mark: 00:42:22

If I have a loan that I've been paying for 25 years, 30 year loan, and I've got some extra money in my savings account and now I'm looking at my loan going, I'm just paying interest now on this, this loan, I'm not paying, I'm not interested. But principal. So I've pretty much spent all the interest off.

Would you suggest I keep paying that loan or just go ahead and pay it off and then I'll take that extra cash that I'm using for that loan. I can keep that.

Sean: 00:42:49

It really like you said, when you're at the end, you get. You got five or six years left on a 30 year loan. The great majority of your payments go into principal. If you're just like at the.

If the money is just sitting in your savings account doing nothing for you and you just don't want to have a mortgage payment anymore, then pay it off. But yeah, like you said, it's the six, one half dozen the other. It's not something that really matters.

Mark: 00:43:11

Okay. Or take that money and put it in the S and P. There you go. Instead of that. Okay, good advice. I think some people end up in that situation too.

Arnold: 00:43:20

Yeah.

Sean: 00:43:21

% since: 1957

Maybe it's a bond that you put it in, maybe it's something else at that point. Because although over time it's returned 10%, there's been 30 and 40% increases, there's been 20% decreases in that.

It's not that if you just put it in, you're going to get this rate of return forever. So you need to think about how quickly you're going to need to access those funds.

It's not nothing with the stock market, nothing with any investments ever. A guarantee.

So the time horizon that you need it, but the longer that it is from you needing the money generally the more aggressive you can be with said funds.

Arnold: 00:44:11

Is it beneficial? Let me back up. How beneficial is it to get a.

Sean: 00:44:16

Pre approval on a loan again, you got to start early. Like the earlier you start, the better that you're going to be in position.

But if you don't have a pre approval and a realtor says it's cool you don't have a pre approval, I'm going to show you 50 houses. You should fire that realtor right away because they're desperate and they probably don't close any business.

Nobody worth their weight wants to work with you unless you have a pre approval. And nobody's going to accept your offer without a pre approval. Otherwise you're just out looking at houses for nothing.

Arnold: 00:44:52

How long does that normally take on average, roughly? I know it's going to be different for different people.

Sean: 00:44:57

If you're ready to go. The whole online application process, which you can do online, you can do from your phone.

Like we all have this push button mortgage technology right now it takes somewhere between 10 and 15 minutes to fill out an application. And then there's the technology we have. It's a lot like Dropbox. So once you do it, you just drag and drop your pay stubs here, your W2s here.

Somebody can be done in 20 minutes with the whole thing. And then if it's a, if it's a simple situation, you make X amount of money. There's not variable income.

We could have your pre approval done in a couple hours. If it's complex and you're self employed, there's some tax returns involved and there's some calculation a day or two.

I'm working with somebody right now who has eight businesses. It might be a week to go through all of her stuff. It's a quick process.

Arnold: 00:45:46

Yeah. Wow.

Mark: 00:45:48

I like that. Some of those less fortunate, financially less fortunate folks, they have a 680. Is that hard for them to Get a loan?

Sean: 00:45:56

No, not at all.

Mark: 00:45:56

I always hear you got to pay a higher interest rate because you have a lower, a lower score. And I think that, to me, that doesn't help those people.

Sean: 00:46:07

Well, it depends. So you really want to be north of 620 as a baseline start. FHA loans are going to have pretty similar rates at a 620 or a 740 credit score.

Conventional loans are going to have a higher interest rate every. So 780 is basically your cream or your crop. And every 20 points below that, the interest rate adjusts.

But Fannie Mae and Freddie Mac, they have a mandate to make homes affordable. And so if you make less than 82,560 now this number is going to be revised in May or June when the new area median incomes come out.

But it's: 802005

Now if you're not putting down the mortgage, insurance is going to be more expensive.

If you're not putting down 20%, but you'd get the same rate at a 640 credit score as you do at a 780 credit score if you're underneath that area, mean median income.

And one of the neat things that Fannie Mae lets us do and Freddie Mac lets us do on these loans, let's say somebody, they're fortunate and they make $80,000 a year and they have a $10,000 bonus. If we don't need the $10,000 bonus to qualify, I can just go off the 80. If they work overtime and that puts them over.

If I don't need the overtime, I can get rid of the overtime. Now, if you make $90,000 a year, I can't just say, oh, I only need to use 80 and you still qualify.

Arnold: 00:47:43

Right.

Sean: 00:47:43

But if I can carve out portions of the income or a lot of times we'll have two people applying on a loan together, fiscally responsible. One of their incomes is underneath that mark. They can qualify on their loan, but both together, they're over that mark.

And I'm like, I can give you a half point better rate if we just do this and let me take you off the loan. You still get to your partner, still gets to be on title, but you are able to get a much better interest rate in the market.

Because again, like, this is what, this is the difference in having a debt manager and somebody who consults you versus an order taker.

Arnold: 00:48:18

Right?

Mark: 00:48:19

Right. I Love it.

Arnold: 00:48:20

We've been talking to Sean Zalmanoff.

He's founder and chief loan officer of Better Rate Mortgage and you can find out more at better rate mortgage.com betterrate mortgage.com Mark this has been really valuable information for even people who have been through the process several times or for those folks who are like, yeah, I'd really like to stop paying rent and I'd like to buy my first house or my first duplex or whatever it would be. It's tremendous information. We just scratched the surface.

I'm sure we could really delve into some more detailed specifics about this, but I think listeners get the flow of what we're doing here.

Mark: 00:48:57

Shawn. I would. It sounds like we should really shop I realtor a lot.

Sounds like that person is going to be a real pivotal individual in the success of finding a home and getting a loan.

Sean: 00:49:09

Yeah.

Mark: 00:49:10

Because you're working with them, right?

Sean: 00:49:12

Yes. So many people start with the realtor and they really need to start with the mortgage company.

Mark: 00:49:17

Okay.

Sean: 00:49:17

You need to get pre approved first. And you know the when you're buying a loan or buying a house, let's say in Missouri, if I'm doing your loan in St.

Louis City or Kansas City, the loan's the loan.

And as long as I understand how your income breaks down, it's very easy for me to see let's area median income that I keep talking about on Fannie Mae's website. I can advise you on the best loan product easily without knowing the streets of Jackson County In Kansas City you have a lot of realtors though that.

Mark: 00:49:55

They want their commission, Is that what.

Arnold: 00:49:57

Yeah, they're just trying to be couth here.

Sean: 00:50:00

Yeah, they just want to get paid and they, they might not know you got an agent who lives in Jefferson County. Only folks in Jefferson county like you don't want them showing you houses in St.

Louis City and vice versa, like you probably don't want the other agent. Now there's a lot of agents that we work with and some great agents that they have teams.

And so there's one person running it, running the team who's got the advice, who's got the knowledge and the realtor standpoint to negotiate and do everything.

And then they have somebody who specializes in Jefferson county and somebody who specializes in O'Fallon, Illinois and somebody who specializes in St. Charles, Missouri. And then all of a sudden then you can have this really, really cohesive team.

But it's really, you got to get the pre approval first. You've got to, you can Go on to the nmls. That's the national mortgaging licensing that was put in place after the Great Recession.

You can see how long your loan officer has been licensed for. You can see how many companies they've been at in the last decade and how many times they've job hopped.

You can look at your, ask your Realtor, ask how many transactions they then ask them to show what, what they're doing.

Now sometimes there's a benefit in working with somebody who is newer in a certain segment but you want somebody who knows what they're doing and it's not just necessarily through experience, but they need to be plugged into somebody who at least is a mentor who's really guiding them through the process.

Mark: 00:51:32

How do I find you? Because I think it's great. If I was looking through the MLS, I go, okay, I'm approved for $250,000.

Okay, how do I find you or other folks that are like you to help me just get to that point?

Sean: 00:51:47

You know, one of the nice things is, you know, Google's been very kind to us. We have a lot of reviews on Google. So if somebody searches Mortgage St. Louis in that local search, I'm usually one of the top guys that comes up.

But the, you just gotta, you gotta do your homework and you've gotta talk to people about, ask them questions. The great thing for you as a consumer is you should Google a little bit about mortgages before you're talking to somebody.

And there's often times where as pathetic as this is 20 minutes of you googling about mortgages and, and then going asking a loan officer some questions, you're going to know more about them than know about, know more about mortgages than they do.

And you're going to understand more about some processes and you're going to know if they get tripped up over how we're paid and how things work and how does this work and how does this affect their interest rate. The old adage that you'll hear almost every loan officer say is we all get our money from the same place.

True statement, Fannie Mae, Freddie Mac, fha, hud. That's how we get our money.

But the margin that people tack on to said money is very different from company A to company B and even inside of company sometimes from loan officer A to loan officer B.

Arnold: 00:53:15

Valuable information. Sean, thanks for coming in and talking to us about this. Mark. I think we probably need to do a part two down the road sometime.

Mark: 00:53:23

Yeah. So much for do we have enough to talk about.

Arnold: 00:53:26

Oh my goodness. And folks, we've talked so long about this, we don't have any time to go to our word of the day or Mark's day of the days or.

Mark: 00:53:35

Even thank goodness for your jokes. You can't do your jokes. That's a good thing.

Arnold: 00:53:40

That's correct.

Mark: 00:53:41

I know. So some things are good.

Arnold: 00:53:42

Some things are good. But Sean, again, thanks for coming in.

Sean: 00:53:46

Thanks for having me.

Arnold: 00:53:46

This has been really valuable and I know people will want to listen to this and listen to this again.

And check out Sean@betterratemortgage.com that's betterratemortgage.com Sean Zalmanoff, founder and Chief Loan Officer Folks, that's all for this hour and we thank you for listening.

If you've enjoyed this episode, you can listen to additional shows at stlintune.com consider leaving a review on the website Apple podcast, podcast, podchaser, or your preferred podcast platform. Your feedback helps us reach more listeners and continue to grow.

I want to thank Bob Berthicel for our theme music, our guest Sean Zalmanoff and co host Mark Langston. And we thank you for being a part of our community of curious minds. St. Louis in tune is a production of Motif Media Group and the US Radio Network.

Remember to keep seeking, keep learning, walk worthy, and let your light shine. For St. Louis In Tune, I'm Arnold Stricker.