#1 Local Mortgage Expert. We Will Match Or Beat Any Rate

Oh, is it time to do another Q&A video? Hey everyone, Ryan Bolton here, local mortgage expert, ryanbolton.com, answering your questions about mortgage and real estate and trying to have a little fun along the way. I hope you enjoy these videos, really enjoy doing them and really love what I do for a living. I love helping people buy and sell and handle real estate. I do mortgage loans, that’s what I do. I’ve done it for many, many years. I started my career in 1999 and have seen and done it all. I lend in Utah and Nevada primarily, but I do have options to do a loan in other states through the company I work for called Synergy One Lending. They’re licensed in almost every state. If you need any questions, I can either direct you to the right person or I can answer them for you. Check out my website at ryanbolton.com. You can download my free mobile app and apply there or you can schedule. There’s a little scheduler on there. If you have a question or want to talk, we can do that anytime.

Let’s go ahead and go into some questions today. The first one I found is a very common question that I’m surprised with, that people don’t realize how it works. I don’t know if it’s the difference between mortgage being a technical word or a bigger word than a car loan or something like that, but here’s a very similar question. Here’s how it reads. If I bought a house with a mortgage and later I want to sell it to buy a bigger house, can I do that if I haven’t paid off my mortgage? The short answer is yes. If you owe $300,000 and you’re selling it for four, when you sell it, the $300,000 gets paid off with the new buyer, whether it’s a loan or not, and you get the other $100,000 left over. The home doesn’t have to be free and clear to sell it. The difference is whatever you sell it for should be or better be more than what you owe on the house. Now when you sell a house, you’re going to have other fees associated with selling it. There’s going to be title fees, recording fees, there’ll be probably property taxes, there’ll be some fees that are associated with that along with maybe any real estate commissions. If you’re using a real estate agent or the buyer’s using an agent, and they negotiate some sort of commission, that’s going to come off the gross amount minus your mortgage is what you’re going to net after it’s all said and done. People wonder, well, how does that work? That’s where a lot of title companies are involved in these transactions and they offer an insurance to make sure that this mortgage gets paid off, your mortgage, and the new mortgage from the new buyer is basically replacing it. This one gets paid off, now the property’s free and clear for like seconds, then the new loan takes its place and there’s a new first mortgage against the property. Happens all the time. Almost every transaction has a mortgage and a new mortgage from a new client is buying that property. And the title companies that go between, it’s the company that gets all the money together, balances everything to make sure that loans are paid off, commissions are paid, taxes, whatever’s on the contract is taken care of and it’s really a seamless process with the title company. And literally the property is not owned by anybody and free and clear for like a half second while they’re replacing stuff. Remove, add, this process, right? That’s what title companies do. That’s what most of them are going to do. And during that process, they’ll have an insurance that protects the lender and the owner that this previous owner doesn’t have a loan out there somewhere or didn’t pay the loan in full or isn’t the owner. That’s where there’s these insurances that protect that transaction on top of it. I tell you what, it’s a cheap insurance in relation to the loan amounts we’re talking about. It doesn’t get used very often, but when it does get used, it’s an entire mortgage; it’s $500,000, $600,000 when it actually does get used. The insurance doesn’t get used all that often because they’re really good at their job and when it does, it’s a big hit. But it is something where that’s their job, is to handle that transaction to release liens. You don’t have to have the property free and clear is what I’m trying to say. It can have a mortgage against it, and the new mortgage just pays it off. And then whatever’s left over, that’s what you get to keep when selling your home. But I have that question or that form of that question actually pops up a lot where I know people have sat on their house waiting to pay it off before they can sell it, not realizing they can sell it, even if there’s a mortgage on it. Just like your car, think about it that way. Do you have to have your car free and clear to sell it? No. The trick is you either have to make up the difference by rolling the balance into the next loan or you’ve got to have it low enough to where you can sell it and not be upside down on the car. Home loans are a lot more rare form to be upside down than a car loan, but any loan, anything you’re going to sell, anything that has a lien or a loan against it just has to be paid first, then whatever’s left over is what you keep. Now there is capital gains, so you want to be careful. If it’s a rental property, you’ll have some capital gains issues, but if it is a primary residence, generally there’s not capital gains as long as you’ve owned the home long enough. There’s some considerations on that money as well, but…

Let’s see, can I claim a rental property as owner occupied to get a lower rate? This is the number one fraud in our industry, claiming the home is owner occupied to get the better rates and terms when really it’s a rental. That is mortgage fraud, period. If you’re not living in the home as a primary residence but claim you are while you have a lease agreement or getting a lease agreement, you’re committing mortgage fraud. Now why is that such a big deal? Why is mortgage fraud or why… Mortgage fraud is a big issue, but why is occupancy mortgage fraud? Because owner-occupieds foreclose less. Because let’s say you have an owner-occupied home and you have a rental, and let’s say you lose your job and you’ve got these two mortgages you’ve got to cover, which one are you going to miss first? Most likely the rental or the second home, you’re going to miss that payment first, not the home you’re actually living in, day to day, your kids, your wife, whoever it is is living in the home, that’s the one you’re going to try to keep or maintain the payment the longest. Where all the other properties are when you’re going to maybe let go or just not maintain them as well. Plus with rental properties, you’re going to have people that are not going to take care of it or going to trash the home and you don’t have the money to fix it and then you can’t get it back on the market. They just foreclose more often. They’re more risky than a primary residence, so because of that, the rates are worse. But people know that so they’ll try to, “Oh, it really is owner occupied,” and then they turn it into a nightly rental or a VRBO or something like that. I’m telling you what, that is mortgage fraud, plain and simple. One of the biggest frauds in our industry is occupancy. Don’t do it, just don’t. If you’re going to do as owner-occupied and switch it later, that’s fine. But live in the home, live in the home for six months, live in the home for a year, then turn it into a rental and start building a portfolio that way. But really it’s something where if it’s a rental property, it’s on your tax returns as a rental property, you’re going to rent it as soon as you close, so you only have to put 5% down. You’ve committed mortgage fraud in most cases and it’s a big deal. Don’t, just don’t do it.

All right, let’s see. Do banks usually require homeowners insurance in order to get a mortgage on an empty lot? No, there’s usually not homeowners insurance on just raw land. I don’t know a single… I don’t know a single bank that would require homeowner’s insurance because they’re not home. That’s homeowner’s insurance. And there’s not really liability. Maybe there’s some liability coverage they would want on it, which would be really inexpensive. Somebody walking down the street and trip and fall on your empty lot, which would be really rare versus a home being there. But I don’t know a single bank that would have a homeowners policy on just empty land. I would say no.

Let’s see, how do you calculate principal only payment for a home mortgage loan? That’s really… The principal payment is just without the interest on it. What you could do is calculate what the interest is and minus that off the payment, that’s the principal on the loan. It’s really just calculating, okay, what’s the total payment? What is the portion of interest on then the principal? But realize each payment you make changes how much goes to principal and interest. The first five years is mostly interest. It’s a lot of interest, very little going to principal and starts to switch as the balance starts going down. But because it’s amortized over 30 years, that first five years is a lot of interest. I always recommend clients if you can, maybe round that payment up a little bit. It can save you a little bit of money. I don’t recommend doing a huge acceleration on the payment because an extra $500 on the mortgage does go far, but an extra $500 on a car loan or some other debt goes way further. Pay off the other debts first, then start to really accelerate the mortgage. But if you can just even round it up to make a difference. If the payment is $1,655, just go to $1,700, just round it up to that $1,700, can get you a little extra to offset the first five years. Because it’s a lot of interest the first five years, just because of the nature of being amortized for 30 years. There’s just a lot of interest on that on the front end of the loan.

Let’s see, can an investment property that doesn’t generate enough rent to cover the mortgage still be worth it? Boy, that just depends. How short are we talking? If we’re talking really short, that can be a little bit scary. That’s where I usually when I’m sitting down with a client looking to buy an investment property, we try to minimize the down payment and then keep the difference in reserve to offset that. I really, it’s really about sitting down with the client trying to figure out how short are we talking? What are the market trends in the area? What’s happening with rents? Are they continuing to rise? Because you figure you’re still getting tax breaks potentially from the mortgage interest, if you qualify, and you’re getting appreciation on that home while you’re covering that shortfall for maybe the first year or two years, that type of thing. But if it’s way short, it may not be worth it. If you’re just breaking even or maybe just losing a little bit on it, there’s other ways you’re gaining on it and over the long term, it will be worth it. It really just comes to how short are we talking? That’s really what it is. And how much money can we not put down and use that to subsidize that payment until the rents can catch up to it? That’s really case-by-case. I’ve seen times where people are literally $500 a month short or you’ll see vacation rentals that there’s some parts of the year where they’re just gangbusters. They make three times the mortgage payment and other times they don’t make anything. It might be a dead month in certain areas where they just don’t rent during that time for vacation rentals. Some of it’s also just managing the cash flow when there’s highs and lows within the real estate. But long-term rentals, it really just comes down to how short we’re talking. Let’s check our time here. How are we doing on time? Ooh, hey, I like to keep these about 20 minutes but comment, question down below. See if you have any questions. We can get to those in another video.

Let’s see. Here’s another one. This one comes… Another form of this question pops up a lot. My income is $60,000. How much mortgage can I qualify for? Here’s the ratio. If it’s $60,000, in fact, I’ll just grab my fancy-dancy little calculator. We got $60,000 divided by 12, so we know what the monthly amount is. And also we typically go off gross amount for wage earners. It’s different if you’re self-employed, which is a double standard but I won’t get on a soapbox about that whole thing. But if you make $60,000, they go off the gross amount if you’re a pay stub W2 wage earner. We’ll assume that $60,000 in this case is the gross amount. That’s $5,000 a month is what that translates into. We will typically times that by 45%. Now there’s times it’s less, there’s times it can be more, but that’s a general rule. That would be $2,250 would be the amount that the mortgage and all the debts on credit have to be under that amount in most cases. Again, it can go up to 50%. I’ve seen it go under 45% depending on the income source, depending on how much money is left over. There’s a lot of factors that determine this, but this just gives us a general idea that if it’s in that, there’s a lot of programs that fit that guideline. Then you minus off the car loan, the visa, the student loan, whatever other debts. Whatever’s left over, that can go towards the mortgage loan. That’s how we factor how much you’d qualify for. And then it depends on the program. If you’re putting less money down, there’s mortgage insurance we have to factor in. If the home is say an HOA, we have to factor that in. All that comes off of that qualifying number. And then the base number, I can do the math reverse and say, okay, well, their payment can only be $2,000 a month, so then that’s what the mortgage can be. That’s just a quick formula. I know it’s hard to do numbers over a video, but that’s a general idea. It’s 45% of the monthly gross, all the debts need to fall under that number. And again, that’s a general rule. It can go a little higher if there’s compensating factors, or if you make a lot more or a bigger down payment or credit score. You can get it higher than that, but that’s a general rule.

All right, let’s see. My mortgage is going from $400… Let’s see. My mortgage is going up $400 a month due to property taxes. I can’t afford this. Do I have any options? Generally, you’re not going to see property taxes go up that much unless you’ve lost some sort of exemption. Now, what I mean by that is a lot of areas, if it’s a primary residence, the taxes are lower. But if for some reason they mail you out a card, or they think that you’ve changed addresses, or you went from a rental property to a primary, something’s changed, then especially here in Utah, in the county I’m in, there’s an actual reduction if it’s a primary residence. Whenever you see it jump up that much, that usually means there’s been some sort of change on the county level that’s either really assessed your home a lot more or changed its occupancy. I would definitely go to the county recorder’s office or treasurer’s office, whoever handles it in your state, and just find out, why did it go up that much? And if it is something where you just lost an exemption, you can try to reapply for it. And a lot of times they’ll work with you on it, especially if it’s just a technicality or something where they had something wrong or you just didn’t fill out a card they mailed out or something like that. But very, very rarely are you going to see a year over increase of that much. We’re talking $400 times 12. You’re talking $5,000, $4,800. And if that’s the difference between affording and not affording, I can’t imagine that’s a huge change in the property value, like if it’s a tax assessed state. My thinking there is that some sort of exemption that was lost that can be reapplied for or just clarified. And they’ll… And I’ve even seen where they’ll refund the previous year. If you could show, hey, I’ve been in this house for five years, primary residence, here’s my driver’s license, here’s the utility bill, whatever, a lot of times they’ll even refund maybe the previous year. They won’t go back further than that, usually, but they will say, okay, yep, we can see that’s really your primary residence. We’ll refund what you paid and you can get it fixed. If you do have an escrow account with your mortgage, sometimes that jumps it up more because they will say, okay, we paid that amount that was higher. Now we’ve got to make up that plus make sure next year you have enough money in the account. That can actually double compound it, but it is something where you can go to the county and fix the property tax bill to then get it adjusted and fix your escrow account. It takes a little bit of time. You might end up having to make one payment while you’re getting figured out, but usually you won’t see that big of an increase in your property taxes.

Let’s see. Time? Okay, yeah, we’ll just keep going. Let’s see, can a bank just take my home? No. The bank doesn’t own your home. I love this question. “You’re just renting from the bank. You really don’t own it.” Of course you own it. It’s a lien against the property. The bank can’t just show up and say, hey, we own this house. We’re going to let our friends swim in your pool. It’s a lien. They don’t own the home. It’s just collateral that if you don’t make your payment, then they take the home away. But until you start missing your payments and the waiting periods are over… Even if you start missing your payments, they have to send you notice. There’s a waiting period to reinstall. There’s a lot of consumer protection out there that the bank can’t just come in the day you miss a payment, kick you out of your home, and then sell the property for a bunch of money and keep it. But it is the collateral. It’s why they’re loaning you the money at the payment and the rate they’re loaning it is because if you don’t make your payment, they’ve got a strong asset they can take back and get their money back. That’s why the rates are as low as they are. That’s why the terms are as low as they are, because it’s a lower risk loan than a car loan or a visa or a student loan or any of these other types of loans that are out there? The bank can’t just take the home away unless you don’t pay. You don’t pay, no stay. Eventually they’re going to take that collateral back. You signed a loan, you signed a note saying, I will pay the $1,300 bucks a month, the $2,300 bucks, whatever it is, and if you don’t, they take your home. That’s why they’re loaning you the money, is because it’s against a secure asset. But they don’t own your house. They don’t own your house. You can do whatever you want. You don’t have to call the bank and say, hey, can I paint my wall a certain color? Can I add a deck? Can I not mow my lawn this week? They don’t own the house. It’s just the collateral for the loan. All right.

Oh, I like doing these. I think it’s fun. All right, let’s see what else. What is the difference between a lease and a mortgage? Well, a mortgage is a loan that secures the property so you own the home. A lease is where you’re just renting it or getting the rights to use the home. That’s really the purest difference is a lease is a rent, a mortgage is owned. That’s really the simplest definition of those two things.

Let’s see. If I cancel a home loan, what happens… Excuse me. If I cancel a home loan, what happens to the deposit? I’m assuming this means contract. I’m going to just assume that means if I cancel the home contract, what happens to the deposit? If it’s within the deadlines, you get that earnest money deposit back. If it’s after, in many… Excuse me. In many states, they get to keep it, the seller gets to keep it. It might be state-specific on where those rules are, but most states have some due diligence period or some sort of time frame that says, okay, make sure this is the home you want, kick the tires, so to speak, do a home inspection, do an appraisal, get your loan in place. There’s all these deadlines that allow you to do those things first. And if none of those check out, as long as it’s before the deadline, then you get your deposit back. If it’s after that deadline, then that’s the money the seller gets to keep by taking the home off the market during that time and not being able to sell it to somebody else. You would get your deposit back as long as it’s within the deadlines. Be just very aware of that. When you’re looking at the contract, talking with your agent, know those deadlines. Mark them down on the calendar, put them in your phone, even a few days before. That’s usually what I’ll do, is when I get a contract from a client, I’ll look at the dates and look at a calendar and make sure it’s not a Saturday or Sunday or a holiday or something like that. Now I usually do at least like a week before, five business days before to make sure, okay, if there’s a problem with the appraisal or a problem with underwriting or something like that, that we’ve got some time to either back out or ask the seller, hey, we need a little more time to get this checked out or figure this out. Knowing those deadlines is crucial on a contract.

Let’s see. Is it possible to get approved for a $230,000 mortgage on $43,000 salary, no debt, 5% down. Yes, it depends on what you mean by no debt. It depends on where the $43,000, but yes, the numbers there would work out. It just really comes down to the type of program, the mortgage insurance, credit score, determining the rate, that kind of thing. But yeah, $43,000 should afford $230,000 with 5% down if there truly is no other debt. And also, I would say this too, that price range sometimes has an HOA. If the HOA is $50, you’re okay. If it’s $400, and it’s got tennis courts and pools and fountains and… It’s hard until you actually have a specific application, a specific client, a specific property, but generally in that general statement, yes.

How we doing on time? Ooh, we can squeeze one more in. I like to keep these about 20 minutes just so people stay watching, I guess. Can I claim a rental property as a second home to get a lower mortgage rate? No. That is mortgage fraud. No, don’t do it.

Let’s see, does getting a home loan to buy a home depend on your savings? Oh, I think I’ve actually answered a few of these before. Let’s see if we can do one more refresh. If we’re able to keep it under 20 minutes… Ah, we’re hitting the 20 minute mark. Oh no. Let’s see. Let’s see, what happens to my mortgage payment if the housing prices fall right after I’ve done equity release? What happens to my mortgage payment if the house prices fall right after I’ve done equity release? Equity release, well, that’s an interesting term. If you got your mortgage, the mortgage payment won’t change regardless of what the home’s worth. Just like if it went up, would your mortgage payment also go up? No. Once the payment is done, once the note sign, once the loan’s secured, it doesn’t matter what the home’s worth at that point. The loan’s tied to the property at that. Now, obviously you don’t want the price to go down and over the long run, it won’t. Yes, ‘08 was a correction, of course. And the price has gone up and a lot of people think there’s going to be some other correction, but over the long run, home prices go up. The asset will increase over time. It is something where… But the mortgage payment doesn’t change. After the loan’s done, after the note sign, there’s no real stake on the value of the home. It doesn’t change, just like if it went up. Everybody sits there and says, hey, if the house goes down in value, the lender should take less money per month. That’s what I have. A lot of people have that thought, and say, well, you guys are the investors, you guys are the owners, you guys are the mortgage company actually owns the house, so if it goes down, I should just pay less. But you never hear the other way around. You never hear it where, well, hey, the value went up $100,000, so I should pay the bank more? No, of course not. No, I don’t pay them more. I only pay them less if the house is worth less. It doesn’t work that way. It’s just that’s not how it works. Same with cars, same with any other loan. You loaned $200,000, regardless of the home’s worth $100,000 or a million bucks, the loan is still the loan. It stays exactly where it’s at.

All right, you know what? Ah, it’s 21 minutes. We were having so much fun. I hope you enjoy these videos. I enjoy doing them. I really like what I do for a living. I enjoy helping people and running these scenarios. And I just have fun doing this. I really have done it for a long time and really enjoy doing real estate. I do real estate investing, I do private money lending, I do traditional lending. I tell people often I sell money for a living to buy real estate. If you need help, I do lending in Utah and Nevada specifically, but we’re licensed in all, most of the states. I think there’s a few way on the East Coast that we don’t do. We’re out here in Southern Utah, right on the Arizona, Utah, Nevada border. Love this area. I love Southern Utah. But it is something where that’s where I focus most of my energy is Utah and Nevada. But if you need help in any other states, I’m more than happy to help. Even if you don’t use me, even if you just have questions, I’m here to answer any questions, point you in the right direction. I’ve really been doing this a long time and just like helping. Call, you can go to my website, ryanbolton.com. It should be listed below the video here. And you can schedule an appointment to call or you can download my mobile app and we can apply and get you pre-approved and answer any questions you have about buying real estate. I hope you have a wonderful night and we’ll see you next time.