The Real Estate REplay
Host Wendy Gilch, and a rotating cast of expert co-hosts, break down the good, the bad, the unethical (and sometimes illegal) things other sellers and buyers experienced while buying or selling a home.
Learn what went right, what went wrong, what they would do differently and how to spot red flags before they become a problem.
The Real Estate REplay is powered by consumer advocate group, Selling Later.
www.sellinglater.com/resources
The Real Estate REplay
"Free" Refinancing Revealed: Unmasking Mortgage Myths, Scams, and Ethical Dilemmas
Unlock the secrets behind "free" refinancing your mortgage with insights from Chelle Prunkel, an experienced licensed lender. Navigate the murky waters of "no-cost" refinancing and understand the true costs and benefits of various refinancing options. Whether you're curious about rate and term adjustments, cash-out refinancing, or specialized loans like the 203H for disaster recovery, this episode arms you with the knowledge to make informed financial decisions.
We'll demystify the mortgage pre-approval process, shedding light on the role credit scores play in securing a mortgage and the implications of working with platforms like Zillow and Homelite. Learn how to protect your personal information from being sold and understand the benefits of soft credit pulls. Our discussion also touches on the ethics of trigger leads and the prevalence of mortgage scams, highlighting the importance of consumer awareness and the need for legislative protections.
Misconceptions about interest rates can lead to financial missteps, but we're here to set the record straight. This episode addresses the media's influence on public perception and explores the advantages of buying in a higher interest rate environment. Discover why focusing on monthly payments instead of just interest rates is crucial, and why a knowledgeable loan officer can be your best ally. Get ready to navigate the mortgage landscape with confidence, armed with tools and insights that empower you to make sound decisions.
Get help from Chelle on our Rate My Mortgage Rate for free (it's actually free)
www.sellinglater.com/ratemymortgagerate
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The free, no-cost refinancing sounds like how real estate agents were saying on the buy side that their services were free and then the DOJ had to tell them. You can't say that anymore and some still do, like that guy who was on Days of Our Lives and now he's a real estate agent and told everyone his services are free. It's the same thing. It's kind of the same thing. It's not free. Welcome to a fresh season of the Real Estate Replay. This season we're diving even deeper into the world of real estate to bring you the insights and strategies that matter most to consumers. Whether you're buying, selling or just curious about what really goes on behind the scenes. We've got you covered. We'll break down the latest news, unravel the most recent of many legal challenges and share stories that help you make smarter decisions. So today we have Shelly Prunkle with us again, who is I think you're like the number one repeated co-host. I think we have like what three, three? Is this our fourth one? I don't know.
Chelle Prunkel:I think this is our third one, this is our third okay, only because the first one. When I re-heard it I realized just how quickly I was speaking. Oh, I didn't Slow that down. And then we had the second one. I'm like, okay, that one was better.
Wendy Gilch:I just noticed that I said um, in like a million, or I'd say the word right after someone would talk, and it's taken me like a year to catch myself to like to shut up when people are talking. All right, so this one is going to be a fun one, because I am seeing all over the place because rates are really not dropping as much as experts and bubble enthusiasts were claiming this year that mortgage companies are now offering free or quote no cost refinancing if you close on a home now that you can tap into at a later date, which I think smells like bullshit. So Shelly is going to join me to talk about what the free or no cost is, because she is a licensed lender and she is my number one lender advocate. She also sits on our Rate, my Rate mortgage panel and always chimes in when people post their loan estimate to help them figure out what BS fees they're being charged there.
Wendy Gilch:All right, shelly, thank you for joining. I'm excited to have you back for third time. Fourth time I know we just talked about it and I already forgot, so let's start with the basics and explain what a refinance is and what the typical costs are that come with it.
Chelle Prunkel:So there's a couple different types of refinances. You have, obviously, rate and term versus a cash out. Sometimes they'll even get mixed in with a renovation refinance. For instance, right now a lot of people who are in presidentially declared disaster areas can do a 203H to repair or replace their home before they get the insurance settlement and things of that nature to kind of get moving on that, and it's 100% financing. That's done through FHA and most people don't even know it exists because it's not the 203k, it's a 203h. But you have those types. And then you have streamlines. Any government loan can do a streamline on a VA. It's called an EARL, which is an interest rate reduction.
Chelle Prunkel:Refinance loan Streamlines or EARLs do not require an appraisal. They do not require a debt-to-income ratio or a residual income ratio to qualify. It's literally documentation, getting title cleared and you get the new lower interest rate, which is why a lot of times you'll see lenders what's called churning loans. So even though it's not the right time for you to refinance you're not really going to save a lot of money they try to entice you to refinance going hey, it's going to be nothing out of pocket. You don't even have to do an appraisal. We don't have a qualifying based off of these things. But those are your main types of refinances.
Chelle Prunkel:You're changing the loan, whether you're changing the entire thing in order to get more cash out or just to get a lower interest rate.
Chelle Prunkel:You're changing the loan, so that means you're going to be changing the deed as well and the closing costs come into play on your title fees, your new escrow account.
Chelle Prunkel:If your most refinances, your previous escrow account is going to get refunded, so that's kind of a net wash really, and a new one's going to get built in. But your title fees, your processing fees, your underwriting fees, any fee for the interest rate all of those are going to come back into play. So it's going to be the same, essentially three to 6%. If it's a full refinance with appraisal, you're going to definitely skip one mortgage payment, maybe two. Always be wary if somebody says you're definitely going to skip two mortgage payments because that has to do with based on timing and whether or not they had to hold back the mortgage payment, which can be risky because you could wind up with a late payment. So I would never suggest doing that. But it's a way to reduce your monthly mortgage payment or accomplish goals. Pay off other credit card debt, things of that nature. But you're still looking at between 3% and 6% in closing costs.
Wendy Gilch:Right, and so just to recap so VA refinance includes what specific costs?
Chelle Prunkel:So you're going to have the funding fee that gets added to the loan itself again. So part of that gets refunded depending upon how long you've had the loan itself, and then you get that to continue going on for it. But then it's all your title fees and then if somebody is trying to make the interest rate look better, you're going to have additional fees for that interest rate, because they are allowed in a VA loan as long as they're bona fide interest rate reduction points. The good thing about the VA loan is because that 1% rule on any origination costs it reduces how much they can try to pad and play around with the numbers, right. And then what about conventional? How much they can try to pad and play around with the?
Wendy Gilch:numbers Right.
Chelle Prunkel:And then what about conventional Conventional to refinance conventional you have no choice but a full on complete redo appraisal. Everything all has to get redone so that you're looking at whatever interest rate, you're looking at processing fees All of them are going to have a processing fee, an underwriting fee, a deed transfer. Some states will have a transfer tax as well, Like in Pennsylvania. If you already own your home, there's no transfer tax. So that's one of the closing costs that won't be in there. But in Florida, even if you already own the home, you still have full transfer taxes that you have to do. So that's a yeah, Even on a refinance. Even on a refinance. That's how they get, because they don't have the same income tax that everybody else does. That's how that kind of works around all of that.
Chelle Prunkel:And then in some states, Delaware, which is an attorney state. You have the attorney fees again that have to be done because you can't close entitlement.
Wendy Gilch:There are obviously costs with doing a refinance. As we just went through, there's a lot of them. So how are these companies getting away with saying they're free or no cost? Where are they hiding the expenses?
Chelle Prunkel:Two things. Number one they're building it into the loan itself. So when people don't see cash come out of their pocket like cash to close, everybody knows about down payment, but everybody doesn't know about all the rest of the closing costs, and that messes with people's heads that they have to bring so much money. And a lot of times people will say well, I did a VA loan and I had to bring 10% of closing for a down payment. Was that down payment or was that your closing costs? And when I start to break it down, it turns out to be the closing costs. But they think it's a down payment. It's a perception of money coming out of my pocket versus it being rolled into a loan. And it can be rolled into a loan just by increasing the loan amount if there's enough space in order to do it. When it comes to funding fees on FHA and VA loans and USDA loans, it's always financed into the loan itself. But if you already had an existing one of those loans, it gets refunded and so it offsets that cost all the way through because you didn't use it for the whole time.
Chelle Prunkel:The other way to do it is to increase the interest rate. So if I increase the interest rate, you're going to get lender credit. And then if you're freaking out about extra closing costs and I go, hey look, but you have this lender credit which covers most of it. Oh, okay, so the lender has given me credit in order to do this refinance. They jumped the interest rate in order to do that. I use lender credit a lot of times when I have people buying homes rather than using a down payment assistance program, because of the fact that down payment assistance programs grants are not free. No bank at any point in time is doing something for free while they have all these people working in order to accomplish things.
Wendy Gilch:And then my other question is say, I get free refinance with just using it as an example, rocket Mortgage. But then I found a better deal with a different company and so I'm not going to use Rocket Mortgage, even though they have a free refinance I'm going to use. Let's say, I'll go to you, I'm going to Nexa, because you had a better deal. So then I prepaid for a free refinance that I'm obviously not going to get my money back for now, correct. So let's say you did the original loan.
Chelle Prunkel:We'll use your example. Let's say We'll use your example. You did your original loan with Rocket who says we'll give you a refinance later on, a free refinance later on. They didn't do anything with that first loan that would affect the second loan. They did nothing. They can't.
Chelle Prunkel:We are so heavily regulated on what fees we can charge that there was nothing there. There wasn't an increase in the interest rate on the first loan. There wasn't additional fees built in on the first loan. There was nothing in there to pay for that. But if they're telling you verbally to where they can't get in trouble for saying free when it's not, and then they're playing around with the numbers on the back end in order to keep your business, you at least reach back out to them. What they're doing is they're creating that tether so that you don't go shop them someplace else. Oh well, I was told that I'm going to get a no-cost refinance through my original lender. Why would I bother looking at somebody else? So that's where that comes into play. There was nothing that was done on the first loan, but they put that idea in your head that they're going to do you a favor if you go with them.
Wendy Gilch:Yeah, I got it Okay. So the free refinance is built into the refinance loan, not the original loan.
Wendy Gilch:Got it Okay. See, this is why I'm so glad you're here, because I spent so much time digging into real estate agent stuff that, like I dip my toes into the lender world and then I'm like I just don't have the time and brain capacity every day to be like, oh, there's only so many compartments I have available right now and it's just easier to talk to you. All right, so if a lender is telling you, stick with me and you can have a free refinance later. Red flag.
Chelle Prunkel:Yes, red flag Got it All right All day long every day. Yes, red flag Got it All right All day long every day. Anytime you see free, on anything, anywhere, any point, it's always a red flag.
Wendy Gilch:Zillow.
Chelle Prunkel:Track you for what?
Wendy Gilch:two years. Oh yeah, that makes they all do it. They all do it If someone. I need to. I need to put this disclaimer out there. If someone is offering to find you an agent, so Homelite, zillow there. If someone is offering to find you an agent, so Homelite, zillow. Rocket Homes. Homescom does things a little bit differently, realtorcom. They will connect you to an agent and they will follow you in your relationship and purchases with that agent for two years and any purchases made in those two years, zillow can get up to 40% of that agent's commission. And if buyers are paying their own agents, you should probably know it might hurt your chance to negotiate lower fees if your agent has to pay 40% to Zillow and Homelite and all the other people I mentioned.
Chelle Prunkel:Oh, just my purchase. My biggest problem with Homelite specifically is because we have in-house lenders. You know, in-house anything is another red flag for me in-house anything, title, in-house title companies, in-house. You know loan officers in-house anything. And we have.
Chelle Prunkel:You see, a lot of agents who are picking up their loan officer license, um, and they're getting registered. They're just a gem and glorified data entry. They don't have to know anything, they don't have to take the test, they don't have to anything. There are some really phenomenal agents who are dual licensed, who slowed down their real estate agent career to learn about our side of things, and their eyeballs just fall out of their head when they realize how much stuff that we have to do versus what they thought we did. But they usually disclaim and sit there and say you don't have to use me, but I can pre-run the numbers for you. And then the new thing I'm seeing is if a real estate brokerage has a loan officer who's dual licensed, they're going to require any offer on a listing property to get a secondary approval by that in-house loan officer and no no, jennifer Beeston talks about that all the time because it's really bad.
Wendy Gilch:In California they're having buyers get cross what do they call it? Cross pre-approval or I forget what the technical term for it is on all their listings and I'm like wait a minute, like it's just frustrating.
Chelle Prunkel:The worst part 99% of those pre-approvals are fake. What? 99% of the pre-approvals walking around out there are fake. What do you mean? How Well, loan officers are not authorized to extend credit or to offer to extend credit. Loan officers cannot pre-approval loan. We can qualify a loan. We can pre-qualify a loan. Automatic underwriting is not a pre-approval. Unless it's gone to an underwriter, it's not a pre-approval. It's not an initial approval, it is just a qualification. Out of my over 250 lenders, only 31 of them will do a TBD underwrite.
Wendy Gilch:What's a TBD underwrite? Oh, so like, before you even get approved, your offer's approved.
Chelle Prunkel:Before you go under contract, before you have an address To get a pre-approval. That's what a pre-approval is is a TBD underwrite. Only 31 of my lenders do them and it takes three to 15 business days to do them, except for one lender who utilizes AI to go through the actual documents and dig into them. Because if I put wrong information in automatic underwriting, I can get an approved eligible and every single one of us have played around with automatic underwriting for different reasons. Okay, if I tweak this this way, how can I get the approval eligible? And there's nothing wrong with that as long as you do the things in order to get that client there. But until an underwriter has put their hands on the file and gone through every single document and run your math equations on what you're calculating for qualified income, it is not a pre-approval. So we're always walking around with little pieces of paper.
Chelle Prunkel:If it for qualified income.
Wendy Gilch:it is not a pre-approval, so we're all just walking around with little pieces of paper.
Chelle Prunkel:If it's one page, it's not a pre-approval. I can send you a copy of what a pre-approval really looks like, and even automatic vendor writing doesn't give us one page. If it's one page, it's not a real pre-approval.
Wendy Gilch:Got it. What a mess. So, speaking of pre-approvals and stuff because I know this is your favorite thing to discuss so when you originally apply for a mortgage, if you did not go on opt-out pre-screen at least a week before, there's a really good chance that the credit bureaus that we are forced to participate with turn around and sell your information the minute they see that a lender has pulled your credit for mortgage purposes. Now that also applies for refinances, correct?
Chelle Prunkel:Anything that is pulled concerning a mortgage, a home equity loan of credit, a refinance, a purchase, a home equity loan, anything concerning a mortgage. But it's even worse than that. So I've had. Last year I was playing around with opt-outfree screeningcom. I have found that unless it's 30 to 45 days before the loan officer pulls it, you're still going to get those phone calls, Really. So I changed beginning of this year. I changed up the way that I do my business. I do two Euro softballs so that I can run the numbers and see where we need to proceed If we need to go to credit repair, if we need to save a little more money, if I need to search for alternative lending products. I do the softballs and I do two Euros because one's just not enough, because none of them have the same number.
Wendy Gilch:Why would we make it that easy?
Chelle Prunkel:Go ahead 28 different scoring models. There's about to be 30 because there's two new mortgage ones that are supposed to go into place at the end of this year or end of next year. That's besides the point. But what I did was that, starting January, I do the soft pull, I do the prelim, everything. I start to gather the documents because I want to find any problems ahead of time, even documents I may not need.
Chelle Prunkel:I may not need your tax returns. I'm still pulling them because I find things like somebody is a personal trainer and they're taking a thousand dollar hit per month in order to lower their taxes, which, heaven forbid, we need those tax returns is going to totally screw up our qualification. Then, once we get everything in line and we're ready to go, I send the client a link so that they can pull and pay for their own credit report. Ah, smart, nobody contacts them. Nobody contacts them because of that, because and it also it does a couple of different things. Not only does it avoid the trigger leads, it also makes it so the client sees instantaneously what I'm seeing. I don't get well Credit Karma said this thing anymore.
Wendy Gilch:Yeah, don't use Credit Karma to figure out what you can qualify for a mortgage based on that credit score, because it's not. It looks much nicer than your actual score, correct.
Chelle Prunkel:It goes either direction, but it's 50 to 100 points off in either direction. Wait what 50 to 100 points off in either direction?
Wendy Gilch:What 50 to?
Chelle Prunkel:100 points In either direction. It's 50 to 100 points off. When you go to your credit card credit score, that's going to be closer. That's only going to be 30 to 50 points off. But myficocom is the only place that I know that you can get your actual mortgage credit score Okay, Because it breaks all out. That's the only place is my FICOcom. I'm not affiliated with them, it's just the only place I'm at, but so they get that instant. Here's what my credit score is. The other thing is is I welcome anybody to shop me that wants to shop me? Go shop me. I work with over 250 lenders. Go ahead, you might. I might've missed something when I was talking to you. You might like somebody else's personality a little bit better. The credit score that you have in your hand they have to accept without rerunning your credit. So if you're concerned about your credit.
Chelle Prunkel:they have to accept that. Now it doesn't have their liabilities on there. That makes it a little bit more difficult, but I'm happy to tell them what their liabilities are. I'm happy to send them over. Go shot me if you want to go shop them. So not only does it avoid the trigger leads, but it allows them to go shop. It allows them to see what I see. It avoids a lot of different things and I get everyone's a lot like a pushback going. Nobody's ever had me pay for my credit report. Yes, they have. On every single loan you pay for your own credit report. I'm just having you do it up front instead of me doing it and you getting harassed for like two months do it up front, instead of me doing it and you getting harassed for like two months.
Wendy Gilch:Well, let's. So, everyone's clear. When you I think I rehashed this, but just to case. So when you apply for a mortgage, they turn around and they'll sell it, and I'm not kidding you, I've seen the screenshots you will get 20, 30, 40, 50, a hundred phone calls from different lenders, some pretending to be in affiliation with the lender that you actually talked to, and it turns out they're not just to get your business and there is something coming down the pipelines to be approved. Hopefully, that would discontinue this. It's supposed to go through Congress soon, is it not?
Chelle Prunkel:We've actually been fighting it for independent mortgage brokers. We've been fighting it for quite a few years. At this point it's just gotten so pervasive. It's insane.
Wendy Gilch:And someone said the CFPB doesn't mind trigger leads, and I find that so hard to believe. I just can't fathom, because you're getting solicitations that you never asked for.
Chelle Prunkel:So here's the idiosyncrasies to it. For the CFPB, other lenders reaching out to the client to solicit them for somebody who's already in process gives that person more reasons to talk to somebody else and not just go with the one person that their realtor recommended, one person that they met online. It gives it more likelihood that they're going to talk to more than one person. So I can see the benefits where that is concerned to some degree. We're sitting here October 23rd, we have an election around the corner and I don't know about you, but I'm getting spam texts all over the place. Oh, october 23rd, we have an election around the corner and I don't know about you, but I'm getting spam texts all over the place. Oh yeah, oh yeah. There's nobody's business and that's just for the election, no less. Something that has a finite amount of time to where you're allowed to contact that client and a finite amount of time to where you can possibly worm your way into earning that client's business. An amount of time to where you can possibly worm your way into earning that client's business. So you know when I say I always tell people you're going to get calls seven to 10 times an hour for the next two months, a lot of big companies that are using it, and I won't say the name of one of the big companies that they are using robocallers. So they're calling from probably three to four of those different numbers for that seven per hour and it's different people that are sitting on the phone waiting for somebody to pick up that phone and then they have a spiel that they go into and they just keep going. But now we have the added fun of all of a sudden there was somebody who called up a client who was in process and they were about to order an appraisal. There was somebody who called up a client who was in process and they were about to order an appraisal and they said you know well, I need you to give me a credit card number for $850 for the appraisal. And the client's just like something doesn't seem right about this. Let me go talk to my loan officer. And the person on the other end of the phone was just like no, I need this money right now, otherwise we're going to cancel your loan and you're not going to be able to to um, I don't remember if it was a refinance or if it was a purchase, but you're not going to be able to complete it because we're going to cancel the loan immediately if you don't give me this 850. And luckily the client had a good enough relationship with the loan officer that she was just like well, my loan officer will save it if that's really the case. And she called the loan officer and the loan officer was like no, no, because what happens is the AMC.
Chelle Prunkel:Whoever we order the appraisal through, the AMC sends out a secure link for them to order and pay for the appraisal. Sometimes I'll send it in text message. When I go to order it I'll usually text the client and say hey, I just ordered your appraisal. Please keep an eye out for that link and make sure it's a secured link. But yeah, that's a new added feature to it and these trigger leads aren't cheap. But the person who's paying for the trigger leads they're getting your first and last name, they're getting your address. They're not allowed to have your actual FICO score or your debts or your social security number or your date of birth, but just with your name and your address. It's very easy to find somebody when somebody sets up trigger agreements. Apparently it's a bucket of people in these states with this range of credit scores go and at one point in time loan officers, when we would go order credit, we would put in like a $25,000 loan amount and that would avoid it because the loan amount was too low for the return on.
Wendy Gilch:not anymore. They caught on to you, I can understand, like wanting to encourage competition but to not even give the consumer an opt-out to, or even like an acknowledgement as to, what's about to happen, I think is my biggest issue is that you know, unless you know, to go and opt out pre-screen, like apparently way before than I thought you know you're going to get these.
Wendy Gilch:And that's what bothers me. You know if a consumer wants to get all the phone calls and shop around, okay, but you're not even given that choice unless someone gives you a heads up about it. That's what bothers me. That's why I don't think the CFPB is looking at it from that direction. But hopefully that bill goes through. It's wild to me because originally I was looking at which website is it that rates the percentage that something will get approved through Congress, and it was at like 4% last year, but now it looks like hopefully it will go through so that we can avoid these trigger leads. Oh damn it. We got so off track, but I think the trigger lead thing is so important to talk about because I just feel like it's so scummy and I know you feel the same way.
Wendy Gilch:So to go back to this whole situation that we're talking about here, about free refinance and stuff like that, so we know it's not free, we know it's not really a no cash, we know you're paying for it one way or another, we know how to protect our data and the one thing I want to close on is the date, the rate and the bubble boomers and all the people that have been trying to tell consumers don't worry about the rate, because it's going to come down. I pulled up some stats. I actually went on Reddit because that's my favorite place to hang out, and I looked up how many posts we're talking about last year, so August of last year how rates are going to come down and just hold off and you know you'll save a lot of money. And that turned out not to be true. What a shocker.
Wendy Gilch:But the amount of people that were saying, hey, rates are going to come down next year, so don't worry, you can buy now and then it'll be cheaper next year and you can refinance. And so you have people that are maybe at like the top of their budget right, who are like this payment's going to be high. I think we can swing it and it's okay, cause they're telling me rates are going to go down next year. We'll refinance next year, which, if you look at the average rates from this year and last year, they're about the same. And even experts that have 20, 30, 40,000 followers on YouTube made a post last year at this time showing this graph of how rates were going to come down. And I can't zoom in because I don't want to have my face like all up in the camera and you'll see in my nostrils. But at this time last year they were estimating that rates would be in the fours right now, and rates today are what?
Chelle Prunkel:october 23rd fives, but fives and sixes. If you're talking about conventional loans, I follow you. Know barry habib is, I follow him. I, you know I get my morning updates and things from him. I get the kiplinger reports.
Chelle Prunkel:He's never said the rates were going to be in the forest this year. That was never a thing. What made that happen was the news media taking the Fed schedule of when interest rates could possibly be reduced by the Fed, when the Fed funds rate could possibly be reduced, which they had six meetings that were all possible, and they rated the percentage of what, the likelihood that they were going to cut rates, which wasn't until July. The news media took that, ran it oh, there's going to be six interest rate cuts. Nobody ever said that was going to happen. Right, like if you go back through any of my old TikToks, I was flipping out because state licensed loan officers were running with this and I'm like nobody is saying that we put too much emphasis on the interest rates. Nobody is saying that we put too much emphasis on the interest rates. That's problem number one. I think date the rate marry the house came from the fact that there's too much emphasis on the interest rate. Number one if I charge you enough. I can make your interest rate look like anything I want to. Is that in your best interest? Number two if interest rate was the most important thing, nobody would be buying cars over the last couple of years, because your average interest rate on a car was seven to. It was as high as 14.49% for average interest rates on a car. It's not interest rate, it's how everything comes together with the monthly payment. So I think when you have some agents who are talking about date the rate marry the house, it's because they don't really understand how the interest rate works and they're not using that phrase in the right way.
Chelle Prunkel:When you have a viable loan officer talking about it, it's more so. Yes, I know this looks high, but the monthly payment is. Are you comfortable with that monthly payment? Right, your property taxes are going to have a bigger impact on your monthly payment than the interest rate. And yes, if you buy at a higher interest rate, you have less competition. You can get more seller concessions and you have a better chance of having your offer accepted versus when the interest rates are lower. You've got more people in the market, more people overbidding, more people with more cash in their pocket than maybe you have that are offering more. So that's driving up the house price, right? The rate isn't necessarily so much, for we know you're going to refinance next year. We know you're going to refinance in two years. Any loan officer who's trying to predict that Red flag?
Wendy Gilch:red flag, red flag. We should just do a whole podcast on lender red flags at some point. I'll just make a red flag episode and go through each, each part of the industry and be like no run. Okay, yeah, we'll do that. We'll do another one.
Chelle Prunkel:A hundred percent down for that because there's so many that are blaring it sounds good, it's not. If it sounds too good, it's not. But if you have a loan officer that's saying look, we know that on average, most people refinance their mortgage, whether it's a primary or even investment property, within three to five years. And we know that when you take an interest rate that feels high, spread over 360 months, really what it comes down to is where is the monthly payment comfortable for you? We know that you're likely, by statistics, going to refinance in three to five years, so you're really only dating this interest rate. At that point in time your interest rate could be up, it could be down, but you could be pulling cash out to pay off higher interest rate credit cards that are at 21%. So we know this isn't your forever loan, so maybe we should change it to date the loan. But it doesn't have that ring to it. But I think that's more so what is being meant? And it just ripped into this completely different thing. And then you've got a lot of people who are just like well, if you're underwater in the house, you won't be able to refinance. Number one, that's not true.
Chelle Prunkel:There are loans to help people who do wind up underwater in their homes, there's hard replacement loans, streamlined loans. We're not doing an appraisal so unless something really devastating happened, it's unlikely you're underwater on your property. West Coast saw homes that were underwater compared to the purchase price but not compared to the loan. With the new regulations that got put in place after the housing bubble, it's very hard for you to wind up underwater on your home. It's almost impossible because of the stopgaps that were put in place. The things that can be done when you have people who know how to find programs to help you. There's thousands of mortgage programs out there. There's thousands of mortgage programs out there, like thousands of mortgage programs out there, but everybody only knows conventional.
Wendy Gilch:FHA and maybe VA. You need to find someone who understands and seek out help before you get way too far. But I, you know, I think the overall gist is you know, we, you and I were talking about this earlier about kids Like if, if you're afraid, well, we talked about it with those bullshit admin fees. But if you feel uncomfortable and your gut's telling you like this feels off or this feels wrong, or like, hey, my gut's telling me, you know, with this rate and this monthly fee, like it's going to be hard for us, please don't proceed in hopes that things will change later and it'll get easier, because even if your rate goes down, life can change pretty quickly and high costs and accidents and things can happen that can set you back so far that it wouldn't even matter if the rate dropped because you can't even afford where you are right now anyways. So I think, trusting your gut, like if you feel what you're being presented is going to be hard to manage, just don't do it.
Chelle Prunkel:The math needs to make sense and, let's face it, our lives are based off of monthly, what we make monthly, what we have to pay monthly. Everything has to get broken down by monthly. When I start to show people hey, if you buy a house in this area of New Jersey where the property taxes on average are $10,000, versus if you go a little bit east to Pennsylvania where the property taxes are like $3,000, you're going to save all of this money per month overall. Are your taxes going to adjust both ways? Yes, but where is your monthly payment more comfortable for what you can do? The hard part is matching expectations with what's available and what can be done, and also understanding that property taxes and homeowners insurance is 12 months versus the actual purchase price is 360. And when you start to understand those relationships it makes it a little bit better.
Chelle Prunkel:Yes, the interest rate is a factor. 100% the interest rate is a factor. It is not the priority, and you can get into dangers if that's what you're concentrating on, because, again, if your loan officer charges you enough, they can make your interest rate pretty much look like anything they want to. Is that in your best interest, right? You know, just like with down payments. I talk with people all the time. If we put this amount down, here's what your monthly payment is going to be. If we put this amount down, this is what your monthly payment is going to be, but here's the difference between how much cash you got to put out.
Chelle Prunkel:Which one makes more sense to you? I give choices. Every loan officer should give choices. I give choices, right. But when agents start talking about loans, it scares me nine times out of 10, because most of them try to get into finite detail and they know nothing about it. Use this DPA program. It's free. Oh, they didn't tell you it was going to jump the interest rate by one and a half percent. They didn't tell you it was a second lien on the property. Yeah, it's a grant, but there's still all these things.
Wendy Gilch:Right. There's restrictions to it, right? I think there's one. It's like if you sell before a certain time period, you have to pay it back, but then if you do sell it. You have to sell it to like a specific person or a specific range of buyers. And yeah, nothing is free, just like the refinances.
Chelle Prunkel:It's not free, you're paying for it some way. 99.9% of the down payment assistance programs are second lien on the property. You have to keep the loan with that higher interest rate for three to 15 years. Home count years is a big one in Florida that everybody talks about. That one refinanced the loan. But the moment you sell the house you have to pay back that home count in euros. So if you sell that house 30 years from now, you're paying back that because they wouldn't have money to lend. People forget they wouldn't have money to lend if they weren't getting it back somehow. And it's not a bad thing.
Chelle Prunkel:It's a question of run your numbers and see what makes sense. Run your numbers with the interest rates. But if you're not even running your numbers because you're afraid of the interest rate, you're doing yourself a disservice. If you're ready to buy a house, if you're not ready to buy a house, nothing on the planet is going to convince you that you should, nor should it. But if you're ready and you're hearing all this fear-mongering, you know interest rates. That's kind of where date the rate comes into play. Because interest rates are are they're a fickle thing. The fed dropped 50 basis points. We've seen interest rates go up ever since the fed doesn't set mortgage interest rates. Worry about how it all comes together and whether or not the monthly payment is comfortable. Do not ever buy at the top of your monthly payment.
Wendy Gilch:All right. So let's recap here. So, no cost free refinance is not actually true and you're paying for it one way or another. Trigger leads are obnoxious and should go away, and hopefully that gets approved next year. Maybe you can talk to your local representative or whomever represents you in Congress to ask them to please approve this. What else did we talk about? Trigger leads, no cost refinance. Date the rate. Date the rate.
Wendy Gilch:And don't listen to people that are hoping for a crash and taking their advice to wait and sit, because, as you can see, all the ones last year that said everything's going to crash and it'll be easy to buy a home Next year. That didn't happen, and so here we are. I know it's hard. It's hard to figure out what to do because you're spending so much money, but people should be talking to people like you, shelly, about what it looks like, what you can afford and how this works, versus internet strangers on Reddit chat groups that are probably just sitting in their basement. I mean, listen, I'm on Reddit. It's not a judgment on Reddit but, like you're taking advice from anonymous people and you have no idea who they are, their background, their experience, and it's better to just talk to a professional like you.
Chelle Prunkel:And let me put this out here it costs you absolutely zero dollars to speak to any loan officer. Zero dollars to speak to us, to have us do a softball to you know? Just run the numbers and get an idea of what your custom roadmap is. And I think the biggest problem is people are afraid that they're going to be denied, declined, because nobody wants to hear. No, nobody wants to tell us. I can't approve this and a lot of loan officers won't make a roadmap on how to get there for your specific situation.
Chelle Prunkel:And then you've got what I call the C lawyer. You ever heard the term C lawyer? Well, you're person A, which is the buyer. I'm person B, let's say the seller, and then you've got the C lawyer, who knows everything about everybody and how everything works, standing on the outside telling you how to do things.
Chelle Prunkel:Um, ufc lawyers that are trying to to predict what the future. None of us know what the future is going to hold. If we wind up in a war next week, interest rates are going to go to the floor. 100 interest rates are going to go to the floor, but a lot of people are going to lose their jobs. So is that the right time for you to buy because the interest rates went down. No, rentals are going through the roof. Should you buy a house because rent is going up? If you're not ready for that responsibility, if you're not ready for it, then no. The answer is no. All day long the answer is no. But people will speak to loan officers to run their numbers and get the information because they're afraid it's going to cost them or they're afraid they're going to be denied. Nobody's ever really denied. If you want it, you just got to keep finding the right people. You got to find your team.
Wendy Gilch:Right, get the right advice. You know, I was just thinking the free, no cost refinancing sounds like how real estate agents were saying on the buy side that their services were free and then the DOJ had to tell them you can't say that anymore and some still do, like that guy who was on days of our lives and now he's a real estate agent and told everyone his services are free. It's the same thing, it's kind of the same thing. It's not free. Surprise, you're paying it.
Chelle Prunkel:You're just shifting where it's getting paid by. Yeah, nobody works for free. Nobody should. Okay, in all fairness, let's face it, there's a lot of agents who wind up doing a lot of work for free. They do a lot of work off front before you get a contract. There's a lot of loan officers who do a lot of work for free, because we do a lot of work off front before you want to contract.
Wendy Gilch:Right, it's not by choice, though. I mean, and quite frankly, like, as things change for buyers, agents, and how they get paid, like I, I think it's worth looking at models based on like so you're not working for free. You know there's very few industries that that operate like that, and so should we be looking at that differently. See see, agents I'm not a horrible, uh, fear mongering DOJ advocate here. Like I'm not. None of you should work for free, and if someone uses you, you should be paid for your services. I said it. Don't hate me, thank you.
Chelle Prunkel:But I also think and you and I have discussed this before brokerages need to quantify what they're providing for their agents, for what they're charging, because you know, I work for a mortgage brokerage, and anybody who has not been a loan officer for at least 18 months I don't think should work where I'm working, because if you haven't been doing this for at least 18 months, you don't know the basics. And then getting access to as much things that I have, you're you're gonna lose your mind. I was doing this for three years before I came over here and I I got access to everything and saw that we could do mortgages for churches and went. Never even occurred to me that a church could need a mortgage, so I took two and a half months to learn stuff.
Chelle Prunkel:A lot of agents are going to the online brokerages like eXp and Real and things of that nature. I don't know that that's the right place for somebody brand new to go to. It does depend upon the team and how much hands-on, but that's the same with all the brokerages. But these larger brokerages, how do they justify taking 60% of the agent comp? And why don't we make it more known what agents are actually getting charged by their brokerages. Don't we make it more known what agents are actually getting charged by their brokerages?
Wendy Gilch:Because they are charging an obscene amount of money and it wasn't always that way or even, good Lord, teams, my God, you said the agent has to pay their team and they have to pay their broker, and then they're walking away with like maybe a quarter of what, whatever the client paid them, maybe if they're lucky, um, and you know, while we're talking about I should have just lost my train of thought, oh crap it was good too darn it, darn it, darn it, darn it.
Wendy Gilch:Um, but I I should. I should end on this note. So if you are a home buyer and you enjoy the fact that the mortgage industry is very regulated and there are a lot of rules and they are overseen and enforced and they're paid attention to, that is because the CFPB is in existence and helped set some of those guidelines up. And it's worth noting. There are two very different administrations and how they look at the CFPB, and one would like to continue funding it and one wants to pretty much flush it down the toilet, and I did that previous episode about this. So if you really are into consumer protection or you wanna learn more, you can listen to the previous episode to this just to understand how different groups view the CFPB and what the future could look like, depending on who wins the election.
Wendy Gilch:I don't care who you vote for, it's none of my business but you should know that the CFPB is well-liked on one side and not as much on the other, so it's worth mentioning that. Oh, you know what I should have worn my? I made my own CFPB shirt in favor of CFPB. I should have worn it today, but of course you know cause I go off topic. I didn't think we'd land here on the CFPB, but here, we are All right.
Wendy Gilch:So I think we covered it all and if anyone has questions, shelly, if you want, how do you want them to contact you and what states are you licensed in in which you can help?
Chelle Prunkel:I am in Pennsylvania, New Jersey, Delaware, Maryland, Virginia and my home state of Florida, so basically anywhere I can drive to or that I know inside and out and to reach me, I mean, just look up Shelly Mortgages online or CP Mortgage Team and you're going to find me everywhere, and obviously on TikTok way too much.
Wendy Gilch:And you're also on Rate my Rate. So if anyone has questions about their loan estimate you can post it on Selling Later on Rate my Rate and if it's in the state that Shelly is in, she's like the quickest person to respond to that and answer your questions. You can ask her questions through there and you can remain anonymous. Shelly would never bother you and our company doesn't sell or share your data. But just because everyone can see the loan estimate publicly, your information's hidden. Because I, like opt out pre-screen, would prefer that your data is not whored out all over the internet and to providers. If you have a story or a question you want to share, hit us up at therealestatereplaycom.
