PITI The Fool

In this episode, Robyn and Erin sit down with Damian Cashman of Ascend, whose Irish accent is as memorable as his deep knowledge of the mortgage industry.

The conversation centers around PITI—Principal, Interest, Taxes, and Insurance—the key components that determine what home you can realistically afford. Damian breaks down how lenders evaluate affordability and explains why understanding your full monthly housing payment is so important.

Damian also shares how Ascend provides access to many of the same loan products offered by major banks, while leveraging strong vendor relationships to help clients find the right financing solutions. He discusses creative lending strategies, non-traditional mortgage options, and other outside-the-box financing programs that can benefit a wide range of homebuyers.

Robyn highlights a common concern among her retired clients; many of whom assume they won't qualify for a mortgage because they no longer receive traditional employment income. Robyn, Erin, and Damian discuss how retirees can successfully navigate the mortgage process and explore financing options when purchasing a home. Listen to the entire episode for more tips! 

Transcript

SPEAKER_02 0:00

I'm Financial Advisor Robin Woolcott. And I'm Attorney Aaron Duques. In our podcasts, we're here to talk about your finances and your legal needs without the technical jargon. In each episode, we're going to tackle a frequently asked question that we hear from our clients.

SPEAKER_03 0:14

No question is too simple. Too many people wait way too long to handle these things just because they don't understand them or they're embarrassed about how long they've waited.

SPEAKER_00 0:21

Welcome to Law and Financial Order. In this courtroom, your wallet has the right to remain informed.

SPEAKER_03 0:29

Hello and welcome to today's episode of Law and Financial Order. I am Robin Woolcott. I'm here with my friend and attorney, Aaron Duques, and our friend Damian Cashman, who works with Ascend. Welcome.

SPEAKER_04 0:42

Thank you very much. Happy to be here.

SPEAKER_03 0:44

And if you didn't already catch it, he has an Irish accent, which is maybe some of the motivation to have him on here just because it sounds so good. Just kidding. He knows a lot of stuff about mortgages.

SPEAKER_04 0:54

So yeah, we'll add some subtitles to Steph.

SPEAKER_03 0:57

Perfect. So we are here to talk about our A team for my 80s babies. We are thinking about the old A team and B.A. Barackis, who always said, I pity the fool. And we say that because P-I-T-I, it's a different type of pity. But pity stands for principal interest payments, property taxes, and insurance premiums for homeowners insurance. And that's an acronym that we use in our financial world to talk about how much house can you actually afford? How much should you be putting into a house? Because if you're like me, you still want to have really nice things and go on vacations and not just sit in your house all day. So we're here to talk about that and give some guidance on what the optimal options are if you're about to buy a house or about to buy a new house or whatever your situation might be. So, with that said, let's give a little intro for Damien. I just want to understand a little bit more about just high-level what you do at Ascend and how you help people get started on this path. Cause I always recommend people talk to a mortgage broker specifically rather than just have me run the numbers on what they could possibly do.

SPEAKER_04 2:01

Yes. So I'm a mortgage advisor at Ascend Financial Network. We're based in North Haven. And as a mortgage broker, we have access to a multitude of products that maybe you wouldn't find at a big box retail bank. So if you were to walk into Chase or Bank of America, they do one thing. They do conventional loans that are sold to Freddie Mac and Fannie Mae. As a mortgage broker, we have access to the very same loans, often at lower interest rates. And people immediately ask, well, why would your interest rate be lower than a big bank? Well, you kind of figure we're not taking deposits, we're not doing home equity lines, we're not doing any investment banking. We have very little client-facing people on the streets. So we keep everything streamlined. So it's almost if you were to hire a painter to paint your house. The painter would not pay the same for the paint that you would pay at Home Depot or Lowe's. So we have the same access. We're just doing one thing, mortgages, and we have great relationships with these lenders who know that we're bringing them well-qualified clients. And um, that's kind of what we do. So we have our conventional, then we also have some non-QM, which are outside of the box mortgages, meaning that's not everybody will fit into the same peg. And with that, we have bank statement programs where people qualify using bank statements. We have other ones where people qualify just on their rental income and investment properties. And we we have lots of different uh ways to qualify people non-traditionally as well as conventionally. So a wide gambit of different products.

SPEAKER_03 3:35

That's awesome. And it's hard because I think a lot of people come at this often thinking, well, if I don't have an income currently, I can't get a mortgage. And I have a lot of clients who retire and then want to get a new home. And they say, Well, I obviously can't qualify for a mortgage, so I might as well just pay cash. And that's honestly one of the worst things that they can do. So we quickly usually explain this whole process, but having those different options is crucial. So we'll get into some of those a little bit more too. The big thing to kind of start with on a high level is the housing cost ratio. So this is what that pity stands for. So with a normal housing cost ratio, what you want in, and these are I'm gonna break down the numbers because the percentages I think are annoying for most people. Technically, your pity should be 28% or less of your monthly gross income, not your net pay, your gross income. So if you make a couple hundred thousand dollars, but you take home 120 after all the taxes and everything else, we're talking about the higher number. The first thing we have to do to get into this is look at property taxes. And because we have to at least account for that a little bit to add it into what we think we're gonna need to ballpark. So if we had a normal sort of homeowner's insurance ballpark on a $750,000 house, I know we talked prior about the stadium too. What you're thinking, what's a good estimate on a yearly amount per year for this for a $750,000 house?

SPEAKER_04 4:55

Yes. So surprisingly, it's more than people think. Uh insurance is reactive to what's happening in the market and what's happening around us. So there's a lot of claims in a certain area. There can be pockets in Connecticut where insurance can be higher. You can often find along the shoreline, it can be higher as well. There's some let there's some uh homeowners, insurance companies that won't even touch the shoreline. So it's really interesting. But to answer your question, you'd probably expect about 3,500 or so would be a good estimate, I think, on a on a house of 700,000.

SPEAKER_03 5:26

Okay, great. And I did check that against with our friends at Anderson Krauss Insurance over in Brantford. They're somebody I I rely on a lot. They said the same thing, probably somewhere between two to four thousand a year, with many factors going in, like the homeowner's credit, their age, their education. And then, of course, you get discount options for bundling with like your car and everything else too. So they mentioned that, but that's great. That's a good ballpark. So if we kind of assume that, I think we want to go through an average potential family on the shoreline. If we're looking at 200,000 a year, 28% of that is gonna be $56,000, right? So we're gonna take out our $6,000 for insurance. So now we're down to $50, and we're gonna divide that by 12 months. So that's $4,200. So I'm rounding, although we don't need to do the exact decimals here. But so you're talking about a $4,200 a month mortgage is something you could afford if you stuck to the 28% pity ratio on your normal income, right? So let's quickly reverse the math because sometimes I think it's easier depending on how you're looking at this. So if we assume that your mortgage and your insurance is going to be estimated at about 4,700 a month. So now that's taking your 4,200 we just talked about, adding back in your 500 a month for insurance. So your total there is 4,700 a month. That 4,700 divided by 28% is $16,785. So that number, the $1,685, is how much you would need in monthly gross income to support that level of house. So I guess you kind of think about it either way. If you're thinking, all right, as a household, we make $200K or we make almost $17,000 a month, we can afford this level of house. So that's the way to do the 28% thing. Now, renovations, this is the fun one. So I think about when I went to get my first mortgage, I bought a condo when I was like 23 or something like that. I was very fortunate to have the foresight to do that early and to take that hit while I could. But the reality was I got into it and I said to my mortgage person at the time, I said, What can I afford? First, he pre-qualified me for whatever it was. And I said, Okay, that's great. Now what can I afford and still buy shoes that I love? And he knows I love to shop. So the thing you have to think about is then in the house situation, which once you get the mortgage, the mortgage is the cheapest thing you're gonna have, right? Because then you have to add, you're gonna renovate stuff, your wife's not gonna like things, your husband's not gonna like things, you're gonna redo rooms, you're gonna add a man cave, you're whatever the things you're gonna do.

SPEAKER_04 7:49

Things are gonna break.

SPEAKER_03 7:50

Then the yeah, the roof goes, the furnace goes, the air, these are all like multiple thousand ticket items, right? So those are the things we have to factor into. So keep in mind you have to add that stuff that cost. So now what about what in your world, Damien, with the interest rates and potential future drops? Because people keep kind of complaining that the interest rates are so high right now, and I just kind of laugh because what our parents paid for mortgages was astronomical, right? Like four times what we're looking at now. But they're so used to these three and even like sub three percent rates that hearing six and a half, they're like, oh my god. So, what do you talk to people about as far as like refinance or things like that down the road, or do you not even kind of get into that yet?

SPEAKER_04 8:32

No, we we we certainly do. So the biggest, I think, misconception people have is that we will reach two and a half or three percent rates again. That was a global pandemic that caused that. It's chances are it's highly unlikely the Fed step in and will because uh a lot of those those rates were backed by the feds. That's how we had to drop. It was the spearhead, it was to engage people to start buying again and kind of take the fear out of things, and it did, it started moving stuff again and people started going buying. So a lot of people move from New York to Connecticut and stuff like that, right? But um I've also seen people who are waiting for this drop again to end up paying more because houses are uh gaining value. So we we've had most houses are organically gaining about like six to seven percent every like 18 months here in Connecticut. It's crazy. So it's the cost of waiting. So now you may have saved a half a point in your interest rate by waiting, but you just paid an extra 40,000 on the house. So you do the math on that, you actually paid more by waiting instead of when you're ready and armed and you're comfortable enough that hey, I can suck up this payment right now and I can see a refinance in my future because I'm able to do it now, I can secure. And also, you have to remember is as interest rates drop, you now have more new buyers coming to that same market. So if we talk about qualifying somebody, right? So uh debt to income, a lot of people get confused on it. But basically, what happens is we run a credit report. That credit report, we're not worried about if you owe X, Y, Z on the is it, we're not worried about balances. We're worried about what your monthly obligation is. So we add up all your monthly obligations that appear on your credit report. Uh, we're not talking about your phone bill, but just like credit reports, auto loans, student loans, and we look at what your monthly obligations are, and then we add that to what your proposed new mortgage payment is. We divide one into the other, and if you don't exceed, surprisingly enough, about 50% of your gross income, you qualify. So we talked about the 28% number. Banks will actually lend up to 50%. Yeah. Are people prepared for that? Who knows? But they do have the ability.

SPEAKER_03 10:43

So well, that's the strain I'm talking about, too. It's like imagine if I went higher, if I got what I was pre-approved for on that condo, I wouldn't admit it go out with my friends or do dinners out or any of that.

SPEAKER_04 10:52

There, there's also a second layer to that. There's also income that we can't use. So let's say somebody works part-time, but they haven't got a consistent underwriting will not allow them to use that income. So we may just be working off one income stream, not two, that may be available to them. So oftentimes some income can be pushed off the table, which is why I believe that variance is there that will let you up to 50. Because if somebody's working part-time and you don't have a two-year history of it, we can't use that income. So now somebody who's after bust and they're, you know, to try and get here and save money and they're working, working. We can't use that income, but in theory they have it, but we just can't put it on their debt to income. So there's checks and balances involved, but is it all realistic? You know, there's there's so many nuances to it.

SPEAKER_03 11:33

Well, that's reassuring, though. Yeah, because that that 50% was making me nervous when you first said it, but that is reassuring if it's because there's these other factors that you might consider.

SPEAKER_04 11:41

Yeah, exactly. Not always the case, but it's there for people. But I also also we do our fiduciary diligence as well, and we turn around and say, listen, are you comfortable with this? Part of what we do is a mortgage, we're not just letting them go blind out there. Like all my clients go to every showing with a sheet in their back pocket showing what their cash to close will be, so there's no surprises, and what their payment will be at that time. So they know exactly what their payment is before they put their offer in. And we do that on Saturdays, we do it on Sundays, you know, because people are out shopping on those days.

SPEAKER_03 12:11

Well, and they I think the interest rate thing, my question on that is because I keep thinking about it for myself too. I want to refinance at some point. I'm not there yet because of the rates haven't gone enough to make it worth my trouble yet. But the reality is, I've always heard the saying, love the house, date the rate. Yeah. So if you love the house, great, get the house. You dating that interest rate, you're not married to it. So you can keep refinancing, you can do things like that to help yourself in the future.

SPEAKER_04 12:34

Typically, people don't stay in mortgages longer than like five to seven years, statistically speaking. So people are whether it's a refinance or whether they actually upchange their house circumstances and need more rooms, they're moving on. Um, very few people I will see that are actually in the 20th year of their mortgage. I could probably count it on one hand. Wow. Yeah, take that into consideration. So to answer your question, yeah, we advise people listen, if you're comfortable with it and it makes sense and you're not bringing stress into your life and you can take it, I would 100% say do it now and just be ready to pounce on it. So we also have uh on our system, once we reach a delta between equity and potential interest rates, it sends us an alert. So we're always reaching out to our clients. Maybe it's not the right time, but we'll when there's a significant reduction in their payment, we'll approach them and say, hey guys, it might be time to take a look at it, which is kind of part of what we do. Yeah, but yeah.

SPEAKER_02 13:29

What about all those people who got those great rates during COVID?

SPEAKER_04 13:33

Will they ever you're looking at one right now? I I I we we went into why would you we went into a 15-year at that time and we were lucky we got a rate under 2%. So it's basically free money at this stage. But why would you? Uh, we're now thinking about it as our family grows. We have four kids, it's a four-bedroom house. Luckily, I have no room for my in-laws. My my my my wife isn't very happy about that. So, right now we're in that position where why would you? We have to, because circumstances in life are are causing us. Yeah, we would change our house. I potentially may try and keep the house just because of that interest rate, turned it flipping into an investment property or something. But there's always circumstances, and people are always asking me when rates are on the news, hey, you busy? We're always kind of luckily enough where we are. People are always trying to move into this area. Circumstances, jobs, life's there's always transactions happening, you know, where they need financing.

SPEAKER_03 14:25

Yeah.

SPEAKER_04 14:26

Yeah.

SPEAKER_03 14:27

Okay. Awesome. Well, so now talk to me a little bit about getting pre-approved. So making yourself as a buyer there. I mean, I've heard the stories, and my clients were telling me the stories, and a lot of them feel like they have to go to every buy with cash. And I'm like, you don't really have to do that, but you could do proof of funds, you could do a lot of different things to show that you could pony up the cash if you had to, but that's not going to be the right financial decision in most cases. So, how do you help people kind of prepare themselves to get essentially to a point where they're marketable as a buyer and competitive with the other people coming in?

SPEAKER_04 15:00

So the shoreline where we're situated, it's really tough for first-time home buyers. A couple of reasons why. Generally speaking, houses are often going above appraised value. So if you're only putting 3% down or 5% down as a first-time home buyer, maybe as a the sellers are nervous that their house is not going to appraise because it's competitive and they're trying to get the highest price possible on their house. So they're actually going to, if you imagine you've got 10 different sheets in front of you with 10 different offers, well, they're going to take the ones with the lowest amount down and put it to the side. And that often confuses a lot of first-time homebuyers because they're like, well, we're bringing the cash to the table. But mechanically in the background, if the house doesn't appraise, then where are you going to get the cash to make the difference? So, generally speaking, any experienced realtor is going to look at offers at 10% down, 15% down, and 20% down. Why? Because they have enough of a delta that if their appraisal was to fall short, the deal isn't going to derail. Because they have to take care of their sellers, you know, the people that they're representing. They may be moving on to another house. There may be retirement in their future. So they don't want the deal to derail when people have movers and different things. So you're always going to take the safest bed possible. It's interesting you said about cash buyers. I will tell you that I probably did about five cash buyers last year. And how does that work? Well, we do something called delayed financing. So somebody goes in and they buy a property cash. Um, we can put a mortgage on that two days after they close. We could do it one day after, but people are usually moving and stuff. But to typically within the first week, we'll turn around and we can actually put a mortgage on that property. So in theory, they bought the house in cash, but they're turning around on the back end and they're putting a mortgage on it for 80% of what they had to put their money back where it should be making money. Or if it's an investor, they may want to use that money to buy other property. So they're going in, no competition. They show their proof of funds, they buy it, then they call me and they're like, Hey Damien, you know, we want to do 70% of this. Now you can only do that if you show proof of the funds coming from yourself. You can't borrow it from your dad or your mom or your aunt or uncle Louis, whoever he is with an envelope. It has to be sourced. So we would show the bank that the money actually came from you. Um, the lawyer would vet it all, and then we can basically just slap a mortgage on it immediately. And a lot, a lot of people do that, you know. Yeah, we see it quite often, especially in this competitive market. The other thing is, you know, it's important again that we talk to buyers and say, listen, it's really competitive out there. You need to be pre-approved, you need to know your numbers, you need to be comfortable because if you're kind of walking into an open house and you're wishy-washy about it, it can be it can be tough. You're nobody's going to take you seriously. So it makes a big difference when they walk in with a sheet, they know what they're pre-approved for. They even know down to like within a couple of hundred bucks what their cash to close will be based on some different you know parameters. It's a small community here along the shoreline. So we know a lot of the realtors and they know that when they see our name on it, that you know our success rate is high there, and they know that our buyers are educated. They won't, you know, they're not they're not going to have sticker shock halfway through it. They're prepared. Nor, you know, if you go to some of the big lenders like Rocket or these guys, I literally could go online and put in, I make $700,000 per year. They run credit and they don't do any income check in the background. So I could get a pre-approval for God knows what. And I walk in and halfway through the transaction, it's oh, well, I'm self-employed, I make $700,000, but my tax return now says I make $50,000. And then they run to us and they got to do an asset, some kind of different kind of a scenario. But it's very important that you know you kind of spend time. Listen, you should not be able to do the biggest transaction of your life on a phone while watching Lawn Order. You know, you shouldn't. You should, you know, it's it's important to know your numbers.

SPEAKER_03 18:45

Not to be confused with law and financial order, of course. Of course. It is of course. That's awesome. No, that's great. I mean, that's awesome that you can do you can turn around a mortgage like that after the fact it wasn't I hadn't really thought about that option. But that's yeah, that is music to my ears when it comes to our clients trying to this stuff too. Yeah. So that would be like a home equity loan.

unknown 19:04

No.

SPEAKER_04 19:04

Or no, it it so what happens is um it's a full cash out refinance. So typically, if you own a property and you buy it, you cannot do a cash-out refinance conventional guidelines for 12 months. Okay. But there's a certain nuance to it that if you can show that the funds came from your own funds and they didn't pass through XYZ fully sourced, right? You can now uh bypass that 12-month rule and straightaway do a cash out refinance on it. So a lot of cash-heavy people will will try and do that. We often find it with investors that are trying to like get a property. Maybe there might be issues with the property appraisal-wise. So they'll go in there and they'll fix whatever they think might be an issue, and then we they make it all ready for a mortgage, and then boom, they put their mortgage on it a month later. They now have access to 70% of the money they put up or whatever they they need, and they're ready to buy their next property again, and they do it over and over and over again.

SPEAKER_03 19:58

That's awesome. Okay. Very cool. All right, good. Well, let's I want to pivot a little bit to Aaron because I want to understand. We talk, we've talked about this on other podcasts that we've done about trusts and what to do with the house and all that. So I kind of want to start on the on the higher level of just first of all, if we're putting a house in a trust, we've talked before. First of all, what's the reason to put a house? What's a what's a normal or an average reason to put a house in a trust?

SPEAKER_02 20:23

Typically, it's to avoid probate because there's no in Connecticut, there's no way to put a beneficiary on a house. So if you don't want to have to to go through the probate court process, you can put it into a revocable trust.

SPEAKER_03 20:34

Perfect. And to do that, you can do a revocable trust and still have a mortgage on the property. It's only if it's irrevocable that it's just near.

SPEAKER_02 20:41

Well, and and I want to talk to Damien about this too, uh, from a practical perspective. Does that cause any problems on your end when the house is in a trust? And do you have any guidance on timing as far as if someone is buying, but they're also want to do their estate planning? They wait. Do they have to technically, legally, if they have it in a revocable trust or they put it into a revocable trust after they've got the mortgage, if it's their primary residence, they can't call the mortgage, the the due on transfer clause, but there are there practical things that you see that you you know great question.

SPEAKER_04 21:17

Yeah, so I'm I'm doing one right now for a property in Florida. This one is in a revocable trust, not irrevocable. So my understanding of it is irrevocable as would tell you is you can't touch it or it can't be changed after the fact, right? Yes, and then revocable revocable as kind of living and you can make the changes, right? So in this case, we're doing it as a revocable trust. The borrowers decided halfway through the process that they wanted to put it into one of the uh trusts that they had. It wasn't a problem from a title side. We were able to just show the revocable trust documents. It was 160 page document, but we were able to change the title from their personal names into it, was actually two revocable trusts in this case. It was husband and wife, and they had two separate. ones not a problem. Revocable trusts can be not every lender will touch those whatsoever. It's just there's more nuances to it. But it's always better, obviously, to do it at the time of closing because it will close in title in that. Um, technically, you should not change once you're in a mortgage from your name to a revocable trust. Do people do it? Yes. Generally speaking, the bank will not bother you once you keep making your payments. It that's what I tell clients, but it only to hear you say it only really goes wrong when you stop making payments. And then I've had I've had clients come to me, and this is uh like two years after somebody had passed, and that's the heirs had just kept paying the mortgage. And then finally it was like, hey, we gotta figure out what we're gonna do here. And the bank never bothered them whatsoever, it's just because the payments were being made. Now, in theory, I believe contracted into it, they should have let them know, but I don't think anybody's ever monitored. It's not like somebody sends up a back bat signal. This person has passed, unfortunately. So, but uh revocable trusts are are more commonplace, irrevocable can be a lot more nuanced, and that many of my lenders won't touch them.

SPEAKER_02 23:06

Well, it's kind of a hate it. That was a question I had ahead. Yeah. Is if will anyone with a irrevocable trust that contains just a house, will they will they lend to an irrevocable trust?

SPEAKER_04 23:19

There is there's a few minor lenders out there who will do it with an adjustment to the rate, but it's a higher risk for them. So everything is everything is stacked risk-based. So yeah, yes, there's a program out there and there is, but there's the adjustment to the rate would be significant, you know?

SPEAKER_03 23:34

Yeah, yeah.

SPEAKER_04 23:34

Yeah.

SPEAKER_03 23:35

Well, and I was thinking we were talking about the current situation or that that last example where you have kids that are just still paying the mortgage and still in the trust. Isn't that kind of a problem from a I guess from a finance side? I'm thinking that when the person passed, that's when that should have transferred to the kids. Well, let's say the kids were the beneficiaries. And then they would have gotten that daily value, that market value of the house at that time. So how does that happen? Like what so if you do that and you just keep paying the mortgage and like pretended like they never died. Does it like once you take possession, does it revert back to the date of death as like the praise of value in the house?

SPEAKER_02 24:09

Well, I think I mean sometimes there's a there's a delay. Is that what happened? They just hadn't settled it yet. And so they continue to pay it. Maybe they couldn't figure out who's gonna get that.

SPEAKER_04 24:18

Some people wake up at six o'clock and some people wake up at eight o'clock, you know. So it's just a case of, you know, it's it's people just did not get around to it. It was, yeah, it was terrible.

SPEAKER_02 24:26

But yeah, or if they're not getting along. Yeah. Yeah. Or if two people two more than one beneficiary wants the house as their share. Right.

SPEAKER_04 24:34

Yeah, but generally you to answer your question, it would be based on the current appraised value. Because you is not paid attention. Yeah, yeah, yeah. Yeah.

SPEAKER_03 24:41

Yeah. Cause then I'm just thinking about I think that way from a future earnings perspective, now with house values going crazy, right? Like if you sit on a house for a year, that thing could be worth if it's a million dollar house, it could be worth another hundred by the end of that year. Now you have that step up, obviously, to the the data death value that you get the house for, but then you're gonna have to pay taxes potentially on the hundred above that. So I'm always looking at it like, how do I avoid paying taxes and keep it all legal? Yep, you know.

SPEAKER_04 25:06

Yeah, exactly.

SPEAKER_03 25:07

Right. Okay.

SPEAKER_04 25:08

Yeah.

SPEAKER_03 25:08

All right.

SPEAKER_02 25:09

So one of the other things is an irrevocable trust, which in in my practice, what we do oftentimes is we will transfer a house out of someone's name in preparation for long-term care planning. The downside of that is it's irrevocable. So now you've given up this asset that you could potentially draw on the equity from. Um, and so that's what I was asking about, because sometimes, well, what if I need to to draw on that? And that's what I was asking about the because that's the downside of the irrevocable trust. Yeah. Um, and you know, people say, Well, couldn't I get a mortgage? Well, you don't own it anymore. Yeah, well, can the trust get a mortgage? So it sounds like though what you're saying is it's possible, but it's gonna be is a higher rate, better or worse rate, yeah. And there's not gonna be a lot of lenders who will do it.

SPEAKER_04 25:54

No, you're you're basically sh uh fishing in the non-QM realm again.

SPEAKER_02 25:57

It's non-QM.

SPEAKER_04 25:59

Yeah, basically they're they they won't sell these loans to Freddie or Fanny. They're basically again higher interest rate. We don't come across it that often, but you know, more so like a lot of it's all re revocable, you know, where they're there people are generally living in a good mind.

SPEAKER_03 26:14

Well, I don't know. In an irrevocable, don't you also lose the step up option too? Or no, you still get that? Mm-hmm.

SPEAKER_02 26:20

So it depends how it's structured, but ours, we you'd still get the step up.

SPEAKER_03 26:24

Okay.

SPEAKER_02 26:25

That's good to know. So it's not like the date they put in the trust, that's not the lockdown house, but right. Okay. But it could be like a situation where what if they want to do improvements on the house? Right. Once you put it in, we tell our clients that they can't put an addition on or redo a kitchen because now it's going to increase the value of the house, which would be an additional gift. Got right. This is a Medicaid eligibility. Uh huh. So how do they do that then? That's where it's like you can put in additional money because you know you want to do an addition, or could you try to l you know get somebody out of the house to do it?

SPEAKER_04 26:56

So yeah.

SPEAKER_02 26:57

Some nuances. So that's why we, you know, people say in their 50s, oh, we want to do an irrevocable trust. Yes, it's good to be thinking ahead and not wait till you have a diagnosis, but you don't want to go too early because all these things that you want to be able to do. Yeah, and you want flexibility. Yeah. And you'll you'll lose that.

SPEAKER_03 27:14

All right, awesome. Well, what did we miss? I think we hit a lot of my targets that I was aiming for today. Is there anything you think we missed that we should have been asking you about, Damian?

SPEAKER_04 27:22

Um, you know, I think we just talk re briefly, I think, about some of the like the non-QM programs or some of the like the circumstances you do come across where you're like, hey, don't move your money, an example. Maybe somebody who their tax return again may not support multiple properties and different things like that. Well, how do you figure that out? Well, there's the bank statement program. So they're self-employed, you can look at 12 months of their bank statements. Uh, what you do is you get a deposit average over the 12 months and you give it an expense ratio. So every non-QM lender gives a 50% expense ratio. So let's say, for simple math, the person has 120,000 being deposited into there over 12 months. So now we have 10,000 a month. So the haircut on that would be 5,000, half of it. So they would actually allow you to use 5,000 of your deposits for income. You can only do that if you have an LC or you have a company or a business. But oftentimes people will prefer to do a bank statement program instead of amending their taxes and having to not write off as much and do different things. Um, and the adjustment to the rate is not terrible, it's like a half a percent more. So I'll often find people that would prefer to have the not to have the tax obligation and they prefer to take the higher rate because oftentimes, if it's an investment property and different things, they can write off some of that as well on through their LLCs. Um, we also have some people who a lot of people don't realize that once you have 10 properties, you can no longer get a conventional mortgage. You're tapped out. The government says, hey, you're done. So at that point, we do a lot of what's called debt servicing loans. So debt servicing is DSCR and basically it's debt servicing coverage ratio. Fancy name for does the rent pay the mortgage? And by mortgage, it's pity, go back to our pity. It's the principal interest, taxes, and insurance. So in this case, we would send an appraiser out there, and the appraiser gives us a rental analysis on the property, and he'd say, Hey, this is how much, let's say it's $3,000 per month or $3,500 if it's multifamily, it could be anything. And basically we look at what the payment is, and if the payment meets what the appraiser said the value was, you get the mortgage on it. So typically with those, it's 25% down. Some of them are 20%, but the numbers may not work if the less you put down. But a lot of times a lot of our seasoned investors who may have I have a guy who's got like 18 properties, you know, and he just does DSCR, doesn't worry about his income because he always has stuff on his credit card. He always has stuff here, his credit is high one and it's down. And it's like, how do you manage it? So he just does everything DSCR. Now he's reached over 10 properties. And again, once the rent covers the mortgage payment, inclusive of your PIDY, print principal interest, tax and insurance, you can do that all day long. Um, another thing is just asset depletion. So if you're over 62 years old, you can take your assets under management. Traditionally, you would divide it by 240. So let's say you had 2.4 million, that would be 100 that, you know, you would do the math on it that way. But there's some non-QM lenders for an adjustment on the rate. So let's say the conventional rate right now is like 6.5 for like a 6.875 or somewhere around there, they would actually allow you to use your assets under management, but divide it by 60, 6.0. So now you have a far uh higher income coming in. But it just allows you to get the job done again in this case, and it's outside of conventional guidelines. How do these guys make money on it? Well, they're all the investors in the background, they put these guidelines in place and say, hey, with the adjustment to the interest rate, we'll take the risk on this. Because what a lot of people don't realize is most lenders, especially in the wholesale side of it, they're not keeping all these loans on their books, right? They sell them off as different types of papers, A, B, C, D, and depending on the credit profile and stuff. And uh Freddie or Fanny buys these loans, which allows the lender to keep lending, right? That's the whole thing. We got to keep the thing going. Similar to the non-QM world, well, it's not Fanny or Freddie that's buying, it's investors like BlackRock, these people, and they're buying this paper based on these different systems, you know. Yeah. So it's uh interesting, but there's just ways of getting it done that people would be surprised, you know.

SPEAKER_03 31:34

That last one that was, I think we talked about it a little bit earlier before we hopped on here, but more of similar to what we have seen done here too, which is like a collateralized loan where they could collateralize the their investments and say, okay, I'm gonna essentially take a loan against these. And those are done through a a bigger bank like Tri-State or things like that, that'll kind of back those here so that you don't actually have to pull your money out of your your investment accounts, and you can let it keep doing that. So yours is the same, it's just using the same concept, just not doing it through Tri-State, doing it through other banks that are gonna maybe have better potential reasons.

SPEAKER_04 32:05

Yeah, the the only advantage is if you collateralize a loan with what you guys do is they could often be a call.

SPEAKER_03 32:10

Right.

SPEAKER_04 32:10

So if it's a call, you're in trouble. Yeah. What do you do if you're short on your call? Right. Or at least this is just collateralized against the asset as it stands right now and the houses of security.

SPEAKER_03 32:20

Yeah. I love that. Yeah. Great option.

SPEAKER_04 32:22

It definitely protects your clients. Yeah. Yeah.

SPEAKER_03 32:24

That's awesome.

SPEAKER_04 32:25

Yeah.

SPEAKER_03 32:25

Great. Well, I guess uh stinging with the A-team theme, just like Hannibal said, I love it when a plan comes together. I got you guys together in like two weeks' notice. I can't believe it with your schedules. So I'm so grateful that you both made the time. And uh we'll we'll do another one soon. So until next time, they're coming.

SPEAKER_04 32:42

Thank you.

SPEAKER_03 32:45

Have you ever wondered how much money you need to retire? What happens to your assets if you don't get around to making a will, if you should pay your mortgage ahead of schedule? Ultimately, we're just here to make the complicated topics less complicated.

SPEAKER_01 32:56

No further questions, Your Honor. Damien Cashman and Ascend Financial Network are not affiliated with or endorsed by L. Hill and Horner Wells.

SPEAKER_02 33:06

This podcast is intended for educational purposes only. It does not constitute legal advice. For specific legal advice that is specific to your situation, it's important to consult with an attorney.

SPEAKER_01 33:17

The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Warner Wealth and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation. Securities and advisory services offered through LPL Financial, a registered investment advisor, member Finra SIPIC. Aaron Duquez is not affiliated with Warner Wealth or LPL Financial.