Jacob Davis
00:02
Mortgage master. Jared Evanson, how’s it going today?
Jarod Evenson
00:06
Pretty good. Jacob T what’s happening on this rainy Friday morning?
Jacob Davis
00:12
Just another day in the life the real estate life, if you know what I’m saying, yeah.
Jarod Evenson
00:18
So I gotta tell you, I’m first day in my new office, in my new house, my new home office. And so I’m getting my ducks in a row. I got my fake plant over here, and I’m just figuring it out. But anyways, yeah, what’s happening today? What do you want to talk about?
Jacob Davis
00:34
So I had one of my real estate agents I worked with. She was like, Hey, could you do a video talking about interest rate buy downs. What that looks like, why a buyer should be thinking about that when they’re making offers. What kind of interest rate could you potentially get with an interest rate buy down from a seller?
Jarod Evenson
00:56
Oh my gosh, yeah. Okay. What do you think the most common question I get when I’m first talking to a new client who’s maybe bought a house before, maybe hasn’t.
Jacob Davis
01:08
If you had a guess, what are interest rates? What’s your rate?
Jarod Evenson
01:12
They always say, what’s your rate, right? And I had a conversation with lady the other day, and I’m like, Well, I don’t know. When she’s like, What do you mean? You don’t know. I’m like, where there isn’t just a rate, right? We, we don’t, just everyone doesn’t get the same rate, or every credit score doesn’t get the same rate. There’s like, a whole bunch of factors that go into it. And much like when you’re doing anything that involves your money you want to do, like, there’s a strategy behind what interest rate you choose or what interest rate you get. So, so what I like to tell people is, well, you can have any rate you want, for the most part. I mean, you can’t get a 1% rate right now, but there’s, there’s kind of a menu of what rates you can get. The more, the lower the rate, the higher the cost, the higher the rate, the lower the cost could be. And so, when I’m talking to people, and they ask me, you know, Jared, what’s your rate? You know, the answer usually is, it depends, and it’s specific to each individual. I locked two VA loans yesterday for VA buyers, and they didn’t have the same rate. They had the same credit score, but they didn’t end up locking at the same rate, and it was because of the overall goals of each of them was different on, on what their short term and long-term goals were. One of them actually had needs to, to have a really, really low payment now, so they spent a little bit more money to buy down to a lower interest rate. The other one was more worried about cash out of pocket being lower. They weren’t quite as worried about the rate and payment as much as they were the cash out of pocket because they’re little cash strapped right now, and they feel like you know, rates are going to go down in the next year or so, so they’ll just refinance to a lower rate down the road, so they save some money up front and took a slightly higher rate. So, it always, it’s, it always. There’s so many variables, you know, you, you have a lot of experience with, like, investment properties, second homes and primary residences. So like, you’re pretty familiar with that as a real estate agent, like, you’re not getting the same rate on your investment property as you are your primary residence or a second home. So there’s just, like, a lot of factors that that come into it. So, I would say, like, you know, for you, like, as a seller or a real estate agent that represents both sellers and buyers. I mean, do you guys, you probably do a little bit of strategy when it comes to that in both listing and you know your, your buyers offers. I would say, I know you’ve seen you guys like, you know seller will offer $5,000 towards your rate buy down, or your closing cost, or something like that. In the past, are you seeing like on your end? Like, do you get questions from the customers or the clients? Or can I say strategy involved on your end when it comes to rates? Or how does that look?
Jacob Davis
04:19
Um, so like with some of my sellers with properties where the home hasn’t sold right away, you know, that’s a conversation we’re having. Hey, home hasn’t sold. Let’s talk about offering an interest rate buy down for buyers so they can get, like, an interest rate under 6% or maybe under 5% to help, you know, ease the pain of these interest rates.
Jarod Evenson
04:53
Exactly. And so, what you’ll find is, for your sellers, for example, the house has been sitting around, and they might call you say. Jacob, lower the price $10,000 and, you know, lowering the price $10,000 as far as buying power goes for a home buyer. You know that might, that might save them. Let’s just call it $45 a month. But you could do the same thing and take $5,000 to buy their rate down and have a bigger impact in most cases, so you can lower the cost half as much, but yet have a better impact. As far as the buyers, you know, monthly payment, which is what most buyers are most worried about. You know, obviously a monthly payment and a home price or a loan amount are going to coincide. But if you can make that payment a little bit lower for a buyer, but yet not have to dig into as much as your equity to sell the house, that’s a win for everybody. So, yeah, a lot of people are quicker to drop the price when they could really be maybe adding a, you know, a closing cost incentive instead.
Jacob Davis
06:05
Well. And I think that if buyers, you know, most people, if they feel like they can buy something in the future at a lower rate, interest rate, then they feel like they’re not being smart, maybe by buying now at a higher interest rate. And so, you know, if you can get that future five or 6% interest rate now and have a little bit more negotiability on purchase price than maybe you know something to look at. So, –
Jarod Evenson
06:39
Yeah, we all know what happens when interest rates go down though?
Jacob Davis
06:43
Yeah, I think it’ll get, you know, we’re I think it’ll get more competitive as interest rates go down. So that website you told me about, the MBS dashboard, would you say that’s a good place for buyers to go to, to look at what’s going on with interest rates. It’s a good barometer.
Jarod Evenson
07:06
You know, if you’re, if you’re looking at it, let’s just say weekly, you’re going to see, you know it’s going to show today, the national average mortgage rate. I haven’t looked at it in a while, but I’m guessing it’s probably showing like, 7.02 –
Jacob Davis
07:22
7.05 in the website is mortgagenewsdaily.com, so –
Jarod Evenson
07:30
Scroll to the bottom-ish, and it shows that average rate today’s rate, now that’s not going to be the rate that most people get that we see. There’s some parameters based off of where they come up with that number. It’s kind of a national average where for advertised rates, and most advertised rates are with discount points included. So, but it’s a good barometer. If you watch it, you know, weekly or biweekly, or even daily, you’ll see, okay, they’re going in the right direction, up or down, and it’s really is a great place to start. You know, interest rates and buy downs like, I think it’s important to know that the lowest interest rate isn’t always the best deal. If that makes sense. You got any ideas why? Why I would say that?
Jacob Davis
08:26
When you’re talking about a loan or when you’re talking like –
Jarod Evenson
08:29
The last trade isn’t always the best deal. So, for example, I was working on a transaction last week, and it was me and I was going against the credit union. The other client was shopping, and I hadn’t heard from him for, you know, a day he probably started. He’s like, Jared, we’re going to go with the credit union. It’s lower interest rate, better low. And so, I asked the young man. I was like, hold on, let’s, let’s take a look at this. Because I knew exactly what their rate was and what their fees were, and I knew that I had quite a bit better. And what they were doing was they were quoting him a lower interest rate, and this was only $150,000 loan, but they were $3,000 more in fees than I was, and so actually, I think was like 4000 more in peace than I was for $150,000 loan. Their interest rate they were quoting was only like $35 less a month. So, I’m like $4,000 for $35 a month. You do the math, you divide, you know, 4035 by 4000 and you come up with that tells you it’s almost going to take 10 years to recover that money. So, I told him, I go. I can get to the same interest rate that the credit union has, and I’m still going to be $2,000 in fees cheaper than they were, I said, but it doesn’t make sense for you to take that lower rate because the costs versus the savings like it didn’t make sense for him to do that, especially with such a low loan amount. So, you know, I had to really educate him on what the difference. He didn’t know. He just thought he saw the lowest rate and that was better. Deal, it wasn’t and so, so it’s important to remember that sometimes it can be, though. So, you know, a lot of times different types of loans are going to have a different set amount of rates. So, a conventional loan, the interest rate is typically just a little bit higher than like an FHA loan or VA loan. Now, VA loans, wonderful, if you have the available ability to use it, use it, but FHA loans, that’s great. It might have a lower interest rate, but there are other costs involved that make an FHA loan a little bit higher than a conventional loan, so you have to really weigh all those options. And you know, a lot of the times the client or the real estate agent, they haven’t really been educated on that to be able to make the right decision, and they’re just going with what that loan officer is telling them. And if they’re a good, honest loan officer, who’s, you know, knows what they’re doing and doing it in the best interest of the client, that’s great, but they aren’t always doing that. And so, you know, it can be important to know why am I, especially a first time buyer? Why am I doing this loan type? Why am I? Why am I using this interest rate? And that way you’re going to be informed and know that you’re in the best position you could be, or getting put in the best loan you should be. So.
Jacob Davis
11:16
So, my question is, Can I get an interest rate under 5% with an interest rate by them,
Jarod Evenson
11:25
It’ll be hard to do that, and this is why there are ways you can do it, through different builders that have a different way of doing it, but there is a limit on how much You can spend to get a lower rate, because what we have is what’s called that. We call it HTML. It’s high-priced mortgage loans, and the overall cost of your mortgage itself can only reach a certain threshold. So, somebody really couldn’t. So, it would depend on what it would cost to get the 5% so, and also your loan amount would be dependent on how, how high you can go and, and so there’s a lot of factors that go there. It might be possible, but it’s not always possible. If that makes sense. You know, you can’t do like nine discount points to, to get to your rate. They would call it a high price loan, and it wouldn’t be eligible, an eligible loan. So because of the fees being too high, because you’d be paying, let’s just call it a $400,000 loan, and let’s say you need to pay six discount points to get to 5% Well, that’s what, $24,000 in just fees, just to get your rate. And so, they would come back and say, No, that’s too much, but, but there is a good I mean, you can buy down three points if you want to three up. One point equals one percentage, 1% of your loan amount. So, if you have a $400,000 loan amount, one point would equal $4,000. A lot of people kind of use that one point as a benchmark as to where, you know, how much discount points you should buy. You know, some people like to buy up to two points. I, I never recommend it, especially right now, unless you absolutely have to. But I kind of in a position like the lowest the fees right now, the better for clients, just because we are in a higher rate environment that we hope will go down, you know, in the future. And so, I think spending too much on discount points now will end up being a waste of money in the future, because that opportunity to refinance will show up before you’ll recover the costs of bringing that rate down. And so, what I mean about recovering costs? So, let’s just say you spend $4,000 to buy your rate down, and that $4,000 saves you. We’re going to call it $35 a month. So, what I’m going to do, and I’m grabbing my calculator here. I’m gonna go 4000 Let’s go. I’m gonna go 4000, that’s the cost. Boom. I don’t know if you can see it divided by 35 equals 114 point 28 so that means it would take you almost 10 years before you recovered the cost of that buy down now that wouldn’t make sense. It would not make sense to do that. You really want to be able to recover that cost in three years for your buy downs four years. And then what that means is, after you made that, let’s say, let’s say the buy down cost, the recovery time was 36 months. So, three years after month 36 you know payment 37 is where you’re really saving money each month, because now the cost for the savings has been exceeded. I don’t expect many people getting a loan right now to be in their loan for that long. A lot of people, I think, will have that opportunity to refinance in the next three years. Think –
Jacob Davis
14:59
Go, what are rates gonna drop?
Jarod Evenson
15:03
When are they gonna drop? My goodness, that’s the million-dollar question. Economy driven so obviously, not obviously, but a lot of people don’t know. But what’s really driving interest rates up right now? Inflation, that’s really the biggest key factor and so. So, there’s a lot of things going on, a lot of different types of consumer confidence with the new administration coming in to where they’re really focusing on energy, is what I’ve heard right now. So, if we can get energy costs down, we can get food costs down, we can get shipping costs down, all those things then, then that should really, really help inflation. Now, combating that at the same time, though, is the threat for all the tariffs. So, will the tariffs cause prices to go up in a whole ‘nother direction? So, depending on how all that shakes out, is going to be the biggest, like, key indicator of when rates are going to go down. There are several reports that come out every month that are economy related. You have the consumer pricing index. You have the housing expenses. You have, geez, new construction. You have all these different inflation reports that come out every single month. And as we see those numbers simmer in turn; we should see rates kind of go down along with it. Now, a decent indicator you could have is like, when you hear the Fed, they say the Fed is going to lower the rate. You know, interestingly enough, your mortgage rates aren’t directly tied to that. So, for example, he did two rate cuts last year, or they did two rate cuts last year. The first one we actually saw mortgage interest rates kind of go down, coincided with it, and we started getting down into the low sixes and even creeping into the fives on rates. But, but then the next rate cut that they did, you actually saw mortgage rates start to creep back up, which is very interesting. Nobody would have expected that, but that was the reaction to it. Because I think there could have been a lot of people who thought maybe it was too soon to do that second rate cut. So, so the market, the market reacted in the wrong way, and mortgage interest rates are kind of driven by mortgage-backed securities, and so a not very good rule of thumb, like, there was a really, really bad day in the stock market on, I believe it was Friday. Could have been Monday, Monday or last Friday. And I was talking to my financial advisor. He’s like, man, we had a horrible day. I’m like, well, mortgage rates had a great day. And so it was, they had a bad day, we had a good day. So that’s kind of a small little measure you can look at too. So there’s lots of lots of factors.
Jacob Davis
17:50
Real quick, I gotta head out here pretty quick. But if you’re a first-time home buyer, what are some recommendations for getting ready to buy a home?
Jarod Evenson
18:01
Yeah, good question. So, take the time to get to know the loan process. So, the only really upset clients I’ve had in years and years and years when it comes to first time home buyers are the ones that we didn’t get the opportunity to really coach them up on what they were getting into. And then they start hearing noise from all these outside places about what they should or shouldn’t be doing, or they don’t understand, you know, different fees and things at the end, like take some time. I mean, it really only takes a half hour to 45 minutes to give you a really good education on, on knowing what you’re doing, right? Doing a loan application is easy but knowing what you’re signing up for is another thing. It can be kind of simple, but if you haven’t done it before, you know you need to understand interest rates. You need to understand how, if you’re shopping for one or two lenders, how to know what deal is better, because the way things are presented from one lender to the next can be different, and it can be confusing. So, so really get educated with by someone you trust, you know, use a strong recommendation. So, if you’re asking a friend, hey, who’s a loan officer, you know, and they spit a name out, but it’s someone that they personally haven’t used. I mean, how much credibility is that referral? I mean, sometimes there could be some there might not be, but I always like to say, make sure you’re talking to someone that maybe knows has personally used those people a real estate agent that person. Now, that doesn’t always work if someone’s relocating or something, right, but, but if you’re local and you’re doing it like, talk to those loved ones that have experienced it and find you know, an interview. It’s okay to talk to more than one originator or more than one real estate agent to, to find out who you’re going to want to work with. So, get educated about the loan process. And it is never too early to have that conversation. If you think you’re going to buy a year from now, talk to me today. Talk to me now. If you think you’re going to buy six months from now, talk to me now. Don’t wait, because there’s so many people that start that process 30 to 60 days before they think they want to buy. But there’s things that I could have had them do in the meantime, if they would have talked to me six months ago, that would have helped their credit score go up, put them in a better position to buy. So that’s the other thing.
Jacob Davis
20:20
So, okay, so I want to buy, let’s say, in six months I want, I want to start talking to you, or talking to you know, a lender, start learning about all the different options for what kind of loans are out there, what my credit score needs to be like, what I can do to improve my credit score, need to find out what my credit score is, and then probably start talking to a real estate agent on you know what your price range is, what is feasible for what you’re looking to spend. And then go from there, wouldn’t you say?
Jarod Evenson
21:01
Absolutely, you know, I have, I talked to like, three people last week who want to buy next fall, and they didn’t have a real estate agent they want to talk to, but we talked to them about their budget. We actually set them up with a realtor. They went to coffee with them, and then, yeah, this is what I want to use. And they kind of gave them some strategies to help them prepare. You know, here’s what you should be looking for in the meantime, like, be looking at houses now, because that way, when you know you buy, you know what’s a good deal, you know what’s in the neighborhood. You want. All those things. And then sometimes on the lending side of things, like, Yeah, I had a client that all we had to do was pay their $500 credit card down to, like, 100 bucks and their credit score shot up 70 points. You know, if, if they’re coming to me, though, three weeks before they want to buy a house, it’s harder to make that happen. It’s harder to make those changes ahead of time. So, start early. Start the process early.
Jacob Davis
21:59
And once you say that you’re willing to talk to anybody, like, say, a buyer, maybe a buyer doesn’t know. Like, they’re just like, yeah, they might know they’re not quite ready. Like, maybe they’re a couple years out. But I mean, I know that I’m willing to always talk to people. I give tons of free advice. I don’t charge for advice. In as a as a mortgage broker, you probably do the same.
Jarod Evenson
22:30
You know? What’s funny is I have more people come to me saying, Jared, I want to see if I can get ready to buy a house in the next two years. And we start talking, and we go down that road, and we find out that they’re ready now, like so many people are surprised to find out, like, oh, I can buy now, but I thought I had to be in my job longer, or I thought I had to have more money saved up, and it’s like, no, you’re ready now. So, like, but, but, yeah, we’ll talk to anybody. And there’s a lot of people that are coming back now that talk to me two, three years ago, and they were no position to buy then, and they started that journey, and now they’re ready. And so, we’ll talk to you, because honestly, I think everybody deserves a fair shot at home ownership, and your journey has to start somewhere, and what? Maybe your credits in the dump, and you need to get there, but you don’t know how to get there. Let’s have that conversation. Let’s start your plan. Maybe you’re ready, and you don’t even know it. That’s, –
Jacob Davis
23:26
Yeah, I had a couple that just bought a home, a new home, and they’re like, 21 and, and I met with them a year ago, like, you know, just talking about the whole thing. And, you know, that’s pretty awesome when a young couple like that, they can get into buying a home at such a young age, because it’s like, you know that equity just grows over, over time. And so, I think after that, I was like, Man, I really want to help more young folks get into home ownership. I know it’s hard right now with interest rates, but you know, if you can figure it out, I think it’s going to be a good deal for you in the future. I mean, I bought my first property, think I was 22 about a duplex, lived in one side, rented out the other, but that’s really helped me, I think, kind of financially grow so I and it kind of makes you a little more disciplined on spending when you get a house to pay for.
Jarod Evenson
24:25
Yeah, yeah. I talked to a lot of when we try to set up affinity programs with employers. Actually, one of the talking points I have is that an employee who owns a home is much more likely to stay with your company because they are looking for more security, because they have that responsibility of the house payment and so, you know, it’s a, it’s a selling point for employers to help encourage home ownership. But you were spot on it. It, it’s like, –
Jacob Davis
24:54
What would you tell us about your Cougs First program?
Jarod Evenson
24:57
Yeah, Cougs First, man, we’re. Uh, Jack Thompson’s and a few other, you know, big baby the Cougs, first organization we, we give, you know, we talk affinity. I mean, we give $2,198 exactly, to lender credit, to our WSU Alumni, WSU employees, employees of WSU owned companies like Schweitzer Engineering Lab, for example. I give my cube source credit to those employees and few others. It’s, it’s a great program. We, we have another one set up with Pullman Regional Hospital is a is another one in Pullman that we have an affinity relationship with. So, it’s great, but, yeah, it’s, it’s, it’s the best feeling, like finding out, gosh, I can’t buy a house. I tell you what, there’s down payment assistance programs available for those people who are like, I don’t have anything saved up. We get people in the houses with little like, less than $1,000 out of their pocket, in some cases, like, that’s some people don’t realize that that’s an option, that’s a thing. And in a higher interest rate environment, this is kind of a hard thing to sell people, but in a higher interest rate environment, first time home buyers that are using Down Payment Assistance have a much higher chance of getting into a home than they do when rates are low and, and, and I’m sure you kind of know why the competition is different, right? Your, your, the buyer has more leverage. Sellers are accepting more offers. You’re going to be competing with less, stronger cash offers, or large down payment offers. And it, it really helps.
Jacob Davis
26:37
Well, awesome. Thanks for, thanks for joining on another YouTube podcast. We call this a podcast, or what is this?
Jarod Evenson
26:49
I think this is a couch talk. Couch talk.
Jacob Davis
26:55
We’re going to call it –
Jarod Evenson
26:56
Another, another. We’ll figure it out. Maybe the viewers can give us some, some tips on a name intro.
Jacob Davis
27:04
How to brand our online meeting. Well, cool. I think –
Jarod Evenson
27:10
Mortgage or real estate mastermind, Chitty chat.
Jacob Davis
27:16
Chit Chat. Well, awesome. Thanks for taking time to share your mortgage knowledge. We’ll do it again soon. Have a great day. Go Cougs.
Jarod Evenson
27:24
Go Cougs.
