Podcast: (Pt 2) Preparing for your next mortgage

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Real Estate

Real Estate Agent Man: The Podcast

Secrets of Florida Real Estate That Should Not Be Secrets

Season 1 Episode 3  ( For the hearing impaired: Transcription below by artificial intelligence software - errors are inevitable)

Your host and Florida Realtor, Steve Martin Smith, interviews Tony and Michelle Moore with Gulfside Mortgage Services. As we continue our conversation we will discuss how private mortgage insurance affects your interest rate, how jumbo loans have been affected by covid, and current scams that could cost you dearly.

Steve Martin Smith  00:02

You are tuned into the Real Estate Agent Man Podcast, coming to you from Sarasota County, Florida.

Steve Martin Smith  00:13

We are back in the studio today with Tony and Michelle Moore from Gulfside Mortgage Services, discussing secrets of real estate that should not be secrets. As we continue our conversation, we will discuss how private mortgage insurance affects your interest rate, how jumbo loans have been affected by COVID, and current scams that could cost you dearly. 

Steve Martin Smith  00:37

People are always talking about first time buyer programs. That's like the big thing in real estate - first time buyers. But what are the great options, currently, for seasoned homeowners and snowbirds?  They need to be able to borrow money too, especially at 3% interest rates, they don't want to take their half a million dollars out of their investments, when they can just borrow money for 3%. Talk to me about that. 

Tony  01:01

I think you're talking about a second home, vacation home?

Steve Martin Smith  01:04

Okay, let's just do that. Let's focus on the second home, vacation home.

Tony  01:07

Okay. We see a huge influx, obviously, with being down here in Florida. People are buying houses, whether they want to retire in a few years and move down here, or if they just want to use it as a second home vacation home to see their family, or whoever they have down here. There's a lot of great products out there for them, you can actually purchase a second home with as little as 10% down, which is which is great. And when . . .

Tony  01:09

I don't think most people know that.

Tony  01:32

A lot of people don't know that. You can buy a condo, a second home condo, with 10% down, also. Whatever type of second home that you have, as long as the condo gets approved, but you're still looking at those awesome interest rates, just like all the other going rates, as long as your credit score is good. They have mortgage insurance on it, you can have an upfront mortgage insurance or a monthly, but the great thing about these products, it's a conventional loan, once you pay it down to 80%, the mortgage insurance goes away. And a lot of people don't understand this, the interest rate at 80% loan to value is the worst interest rate out there. The reason why everybody, everybody thinks that 80 % is the best. The reason why it's the worst is because the lending institute, the bank, is letting you borrow the most amount of money that they'll allow, with no mortgage insurance, no protection. You're literally borrowing the most they'll allow you to. When people put down 20%, they think they're getting the best rate, they're getting the worst rate.

Steve Martin Smith  02:23

So they're not necessarily saving on their monthly payment or not as much as they would have thought they were. 

Tony  02:30


Steve Martin Smith  02:30

...by not having private mortgage insurance?

Tony  02:33

you actually get a better interest rate when you have mortgage insurance.

Steve Martin Smith  02:38

Yeah, I didn't know that either.

Tony  02:39

A lot of people don't. If you pay down the loan to 80%, after closing sometime, you can actually get the mortgage insurance removed automatically at that time.

Steve Martin Smith  02:48

It's not just a matter of paying it down, it could just be that your value went up, right? You get an appraisal, it shows that you have 80% equity in the home, based off a current appraisal. Does it work like that? 

Tony  02:59

Yep, there's three ways. This is one thing we actually go over at closing with borrowers that have PMI, the mortgage insurance. There's a few different ways to get rid of it, the first way that you get rid of it is you pay down the loan to 80% of the original purchase price. So whatever you put down, you pay it down to 80%, it automatically goes away. The second way to get rid of it, is it automatically goes away, when  your scheduled payments would be down to 80%, which is 11/12 years in the future. Then the other two ways to get rid of it is to use the new appraised value. So option number one is from your 24th payment to your 60th payment. So that's your two to five, as long as you can prove to the lender, you have at least 25% equity in the house, they'll remove it because they have to get a BPO, an online valuation, or you have to get an appraisal. The second way is from month 60 on, so year five on you can do the same thing, BPO or appraised value. At that time, you don't have to show you have 20% equity in the house. Any of those ways that you do it, your PMI automatically goes away. You do have to work with the lender where you're getting appraisal, but the other two, as soon as you pay it down, it goes away automatically.

Michelle  04:05

I'm glad you explained it that way, because most people don't know that either. The difference with the appraisals. 

Steve Martin Smith  04:11

I'm gonna have to listen to this podcast several times to make sure that I really caught all that, because there's a lot of meat in there, I know there is.  Just the basic thing that I just caught is that when I'm talking to my customers, and they're being concerned about PMI and all that, it sounds like I can say look, there's a chance you're going to have a lower interest rate than you would have if you didn't have PMI. Talk to your lender about that. 

Tony  04:36

Right? Absolutely. 

Steve Martin Smith  04:38

As long as I say, talk to your lender about that I'm safe. 

Tony  04:41

You are safe.  Ask that question of your lender. If your lender can't answer that question, you're working with the wrong lender. I mean, if you can't explain what interest rates are and how to get rid of your PMI, or any of these things, how are you working with the right person? You really got to make sure that you have somebody who knows what they're doing. I mean, you don't want to walk into surgery with somebody who doesn't know what they're doing. I mean, it's just the way it goes. 

Steve Martin Smith  05:04

What's that knife for? What am I supposed to do with that?

Michelle  05:08

You don't want to have a foot surgery with an eye doctor.

Tony  05:13


Steve Martin Smith  05:13

Yeah, I feel ya there. I recently called you about somebody who was looking for a mortgage that would be 10% down on over a million dollars. That wasn't something that we could do. How does that work? Why can't we do that? What are the parameters on trying to borrow a million dollars? 

Tony  05:33

That's a great question. Unfortunately, right now, with everything that has happened with COVID, one of the areas of our industry that got hurt was the jumbo loan market, the jumbo loan market, and also the portfolio market. The portfolio lenders, or lenders that lend their own money, and don't go by Fannie Mae and Freddie Mac guidelines. Well, jumbo loans are exactly the same as that: they don't go by Fannie Mae and Freddie Mac, they're not backed by the government. They're a portfolio lender. What happens is, a lot of those jumbo lenders were scared and didn't know what's going to happen in the last thing they wanted to do was lend money to somebody, especially at 90%, and then all of a sudden, them go into foreclosure or forbearance because they lose their job due to COVID. So we literally lost about 60% of our jumbo loan lenders since COVID started, and they pulled back on a lot of their products. There are some lenders out there, and I'll tell you, we refer them out to everybody all the time, and there's some some wonderful credit unions out there, that are doing jumbo loans at better deals and higher loan-to-values than we can do. It's not that they're not available, it's just harder to find them right now.

Steve Martin Smith  06:37

Well,  it's common sense that as the economy changes, lending is going to change, and it needs to, we all need it to, nobody wants to see 2009 ever again. A lot of people have gone on to see 2020 again, too. 

Michelle  06:52

That's what a lot of people don't realize, with COVID, if the borrower misses even one payment during that first 12 months, that lender is stuck with that loan forever, and no lender wants that. They have to have the ability to sell it if they have to free up business, if they have to open up their books a little bit. When you have to give them cash flow, so if they're stuck with that loan forever, that's not good.

Steve Martin Smith  07:18

So if you're looking to do a jumbo loan, at some point, you want to get into that million dollar house and you only have $100,000, you just have to be patient and just wait for the economy to come back around to where there's more people feeling comfortable doing that. 

Michelle  07:31


Tony  07:32


Steve Martin Smith  07:33

It's not like it won't happen again. It's just happening very little right now.

Tony  07:37

Very little, and there are still some lenders doing it. Like Michelle said, as far as the jumbo market goes, we still do jumbos, we still have four or five lenders that are doing them, but the high loa-to-values is not where us, in the correspondent lending, are at. The portfolio lending, which is some of the credit unions, they're taking more risk with those jumbo lenders because they want to capture you as a banker, right? Those credit unions want to pull you in, they want to get your bank accounts, they want to get your credit cards, they want to get everything. So they've opened up to do more, because they know that the rest of the industry is pulled back a lot not doing it right now.

Steve Martin Smith  08:10

So what are they doing them at, 20%?

Tony  08:13

They have some 10% down.

Steve Martin Smith  08:14

Oh, they do have some 10, but is 20 more common? 

Tony  08:17


Steve Martin Smith  08:17

 I'm just guessing.

Tony  08:18

A lot more common, and we do 20 or more down. We're very competitive when it comes to those but the those higher loan devalues, we can't even do it over less than 20% down.

Michelle  08:31

They'll probably have to open up a checking account or savings account with that institution to secure that loan as well. That helps them with that business, it secures the loan form, and makes it look better on the books.

Steve Martin Smith  08:45

I think one of the great takeaways from this little segment right here is that you are still the people that they should call because if you can't do it, you're referring the customers to people who can. You know who those people are.

Michelle  08:57

Yes, we stay local. 

Tony  08:59

We continually work with everybody local, and we find the product for them. We let people know what's available, and where to go. It's the same thing with a home equity line of credit. We don't do them, but I'll tell you I know who does locally, and where the best places are to go. I'm going to steer people in the right direction to make sure they're getting with somebody to do them. Home equities is another one. Home equities range from you paying thousands of dollars in closing costs, to paying zero in closing costs, to having prepayment penalties and no prepayment penalties. There's so many different caveats on them, that unless you are in the industry or call around to 40 different banks, you're not going to know the answers.

Steve Martin and The Smiths  09:37

I recently had somebody write a review for us online, and and they said you can either buy a ton of homes and get good at it, or you could just call Steve and Katrina.

Tony  09:47


Steve Martin Smith  09:48

That's really what it is. Let the people who do this all the time be the ones who are guiding you through it. 

Michelle  09:53


Steve Martin Smith  09:54

We are halfway through another great podcast with Gulfside Mortgage Services. You do not want to miss the next seven minutes. Before this day is over, make sure you visit GulfsideMortgageServices.com. When you call them, mention, that you heard this Real Estate Agent Man Podcast.

Steve Martin Smith  10:14

And now back with Tony and Michelle Moore.

Steve Martin Smith  10:20

I wanted to try and hit on common scams. I received a call from a customer who I put into a house in January. He called me yesterday and said, Steve, I just got to bounce this off you.  I got something in the mail, and it says that I need to pay $89, I need to send a check to this address so that they'll give me a copy of my deed. Do I really need to do that? That's one of the oldest scams in the book from my world. But this is a gentleman who's only bought a couple of houses in Florida. So he's not familiar with that. 

Michelle  10:52


Steve Martin Smith  10:53

The thing that I was happy about is he was smart enough to call me and say, is this real? What kind of scams do you guys see in the lending world? 

Michelle  11:04

I don't know. I'm blank ( laughter )

Tony  11:09

Steve, honestly, that's one of the biggest things that we also talk about at closing and through the whole entire transaction with borrowers. We talk to them the whole time,  because there's so much that happens. The one you're talking about, you know, it's not illegal for them to do that. They're literally going to go get your deed and they're going to mail it to you for 50 cents, or 59 cents, whatever the cost of a stamp is, and charge you $90 to do it. It's not illegal, you're paying for their service. You've got to be careful. The biggest scam that's happening right now has been going over the last two years is wire fraud scam. We literally and the title companies and everybody talks to everybody daily about this. We have to be careful, we have to make sure that we're confirming the wire instructions from the title company, we have to make sure that we're going to our bank, we have to make sure we're watching our emails, because there's so many scams and frauds out there right now. With this being 2020, there's more now than ever, because there's so many people that are sitting at home trying to figure out ideas to get people and whatever it is. The wire fraud scam is huge. The one that you talked about about the deed and getting the deed is also another big scam

Michelle  12:19

Social Security scams right now, people will call you and say your social security number has been tampered, and your credit, you know, and they've charged all these things on your credit. What's your social security number, so we can verify that this is you? Older people or young people, they don't know the difference. You should never give that information. Social Security will never call you and ask you for your social security number.

Tony  12:42

Or the IRS.

Michelle  12:43

or the IRS. That's another big one. 

Tony  12:45

Yep. Michelle is going outside the realm of lending, but it's not really, because if somebody gets your information and you have identity theft, or they compromise your credit card, and there's late payments on your credit card, guess guess what happens? 

Steve Martin Smith  12:57

You don't get your mortgage.

Tony  12:58

You don't get a mortgage, or you got to pay a worse rate for it because of identity theft. 

Steve Martin and The Smiths  13:03

I'm just trying to think from the side of evil Steve, if I was trying to do stuff like that, who would I target? You target lenders, you're trying to hack their emails, you're trying to hack the emails of real estate agents, and title companies, because you've got a good chance of finding people that are about to spend a lot of money.

Tony  13:22

Yes, it and you know, I was gonna say the way that has been presented to us is that these phishers out there, these Internet Phishers, that phisher in your email, they look for the words "buying real estate," "selling real estate," those are what they're looking for. If you have an email, that's an old email, like an AOL account, or something that you haven't updated your password in a long time, they've got into your email by you clicking on something that you shouldn't have clicked on,  all of a sudden, now they see every email, they literally intercept the email from the title company, redo it, change one letter in the email address, and send you their wire instructions to send a wire to them. You have to be super careful, because they're super crafty, and they can get people pretty easily. It's happened to one or two of our customers over the last few years. Thank God, they didn't send any money. But they got a phishing email that we were like, that's not from the title company, you got to be careful.

Steve Martin Smith  14:18

The last broker I was with, had somebody who had lost about $500,000 on a deal like that. I mean, it wasn't the broker's fault. I'm not throwing them under the bus. That kind of thing just scares me. 

Michelle  14:18

It's very scary.

Steve Martin Smith  14:30

I'm having all kinds of conversations all the way along the process when it gets to the point and people are starting to talk about wiring money. One of our local Realtors, I'm not mentioning their name, but we all share email addresses because we are always talking to each other about the different houses and doing sales together, and Katrina and I both received an email that made it obvious that their email was hacked. I immediately go in and change my email password to a different 26 digit password. Fortunately, our son's in cybersecurity, he watches all this stuff. We use a program now that auto generates these massive, ridiculous passwords. 

Tony  15:12

It's a smart thing to do. 

Steve Martin Smith  15:13

He makes us change them out and all that. If anybody's getting information, it shouldn't be through my email.

Michelle  15:20

We change ours all the time too. It's 26 letters and numbers and symbols and it's very important, and one thing that we do is, we're the same way, we educate our borrowers from the beginning about wire fraud. We have a form that we send out, we send them in our email, we will never ask you to wire us money ever. Then when we get to the closing and we tell them, before you wire those funds, call the title company because title companies change their wiring instructions all the time. They're not always good at calling all their customers to tell them that they change, so the wiring instructions I got 30 days ago might not be the same, so when they wire the funds, who knows where it would go.

Steve Martin Smith  16:01

Once it's gone, once it ends up in that offshore bank account, it's gone.

Michelle  16:05


Tony  16:07

Not too long ago, it was in 2019, somebody sent a million dollars to an offshore account in Sarasota. They pay cash for a house, and they lost it. Yes, that's horrible. Nobody wants to lose a million dollars. But think about the first time homebuyer who has to send $5,000 and has been saving up for the last five years to get that kind of money, and they're so happy, they're so everything, and if they don't double check and look and they wire their money, their dreams are crushed. Right? 

Steve Martin and The Smiths  16:37


Steve Martin Smith  16:39

Do you believe the wealth of information here? This is incredible? Hey, have you told your friends about us yet? You need to get them over to SteveMartinHomesGroup.com  and check out the podcast page. What are you waiting for?  Tune in next week for the third and final episode with Gulfside Mortgage Services, when we will unravel the mysteries of interest rates, and get the truth about first time homebuyer programs. 

Steve Martin and The Smiths  17:03

Real Estate Agent Man, Real Estate Agent Man, Write down his telephone number and do not forget his name. 941-894-9800. SteveMartinSmith.com. Steve Martin Smith is a licensed Florida Realtor with Remax Platinum Realty and Steve Martin Homes Group. 

Tony  17:31

Tony Moore NMLS number 220640

Michelle  17:34

Michelle Moore NMLS NUMBER 223691.