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Demystifying Mortgages and Financial Education

• Courtney Twiss • Episode 32

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Unlock the secrets to homeownership with mortgage guru Mike Ruh in this enlightening podcast episode. With over a decade of expertise spanning residential, commercial, agricultural, and industrial properties, Mike takes us on a journey from his early days influenced by a family legacy in real estate to becoming a homeowner at just 24. He shares invaluable lessons from Dave Ramsey's Financial Peace course and underscores the significance of financial education in achieving homeownership. Whether you're a first-time buyer or a seasoned investor, Mike's mission is to demystify the mortgage process and empower you with the knowledge to make sound financial decisions.

Ever felt lost navigating interest rates, homeowner's insurance, or the mortgage process? Mike breaks it all down, especially for first-time homebuyers. Despite the challenges of higher interest rates, there's a silver lining—current rates are showing a slight decrease, and historical trends suggest further reductions are on the horizon. Mike's personal stories of handling high interest rates for investment properties offer strategic insights into the advantages of entering the market now and refinancing later. His expert advice helps you understand why buying a home in the current market could be a savvy move, even amidst financial uncertainties.

Mike also dives into the nitty-gritty of pre-qualification and the importance of maintaining pre-approval status. He highlights the benefits of purchasing homes when interest rates are high, pointing out potential for lower prices and reduced competition. Additionally, he sheds light on loan programs tailored for non-citizens, such as those using IRS-issued tax identification numbers, and the need for professional advice over sensationalized media reports. Tune in to glean wisdom from Mike Ruh and learn how to navigate the complexities of homeownership with confidence, especially if you're based in California.

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Speaker 1:

Yeah, something tells me you spent some time on that.

Speaker 2:

No, no, no, no. This is, this is just rolled out of bed.

Speaker 1:

Yeah, well, he's over 30 now, so that means you have to take longer to get ready.

Speaker 2:

Just kidding, oh yeah, yeah, yeah, yeah. This is this is my. This is my pajamas, believe it or not, this is this is all right.

Speaker 1:

Welcome to episode 32 of the now podcast making moves in real estate, not making money in real estate. I don't know if you saw that in the article yesterday oh no, there's an article about us and it said it was called making money in real estate. I don't know if you saw that in the article yesterday oh no, there's an article about it and it said it was called Making Money in Real Estate. Lauren read it to me and I'm like you mean making moves and she's like no, it says making money. Well, we all want to make money in real estate, so anyway, it's Making Moves in Real Estate. Today we have a special guest who will offer some invaluable insights into the world of real estate finance. He's been in the mortgage industry for 10 years, with expertise spanning residential, commercial, agricultural and industrial properties, and his experience makes them a go-to expert for all things mortgage related, and we're excited to have him on our show. Please help us. Welcome, mr Mike Rue. Welcome Mike.

Speaker 2:

Hi, thank you so much for having me.

Speaker 1:

Yeah, thanks for joining. We appreciate it. I know it's been kind of a crazy time to be in the mortgage industry.

Speaker 2:

A little bit, yeah, a little bit. It's definitely an odd place to be, but it's slowly but surely coming back and picking up, which is always good. That's what we look forward to. So this is going to be it's going to be a great time.

Speaker 1:

Why don't you tell us a little bit about why you got in to this industry to begin with?

Speaker 2:

Oh goodness, yeah, so 10 years ago no-transcript, so it's been. It's been an experience, for sure, but it's definitely been something that I think it was destined for, you know, between family and and everything that was kind of pushing me towards it. So it was, it was meant to be for sure.

Speaker 1:

Yeah, it's definitely in your blood, I think with you and your mom are so similar from one another because our listeners don't know, but his mom and I are very good friends and that's how Mike and I have started working together and I think not only do you do so well in the mortgage industry, but you practice what you preach. You became a homeowner at a very young age. How old were you when you bought your first house?

Speaker 2:

24.

Speaker 1:

Yeah, which is pretty impressive, and I think your mom bought her first house at 20 or something really young too, if I remember correctly.

Speaker 2:

Yes, yeah, low 20s, for sure, I think it was 2021, somewhere around there. Yes, Awesome.

Speaker 1:

Well, and he's a Dave's, a dave ramsey financial peace graduate. What tell? Us about that off a bunch of stuff a couple years ago, right?

Speaker 2:

yeah, it's, it's been uh, two years ago, yeah and um, it was. It was pretty great. It was definitely uh. It was something that I knew a lot of what they preached, but it was definitely something to kind of work on and there was a lot of fine tuning that needed to be done. I was always been I've always been a finance kind of person, so getting into that class was a lot of fun. There was a lot of things to learn, things that even if you think you know there was always a surprise around the corner. So it taught me a lot and it definitely helps me do what I do, so that's always good. It helps me advise other clients into how to be a healthy homeowner, which is what we really strive for.

Speaker 1:

Yeah, I would say feedback I hear from our clients is just that you're really good with educating them, especially with the new homeowners, and you know, like you said, there are lending companies healthy lending companies so it is all about that education and making sure people understand the process and what their fees look like and their payments. And you know why are you passionate about that and what have you been seeing lately with your clients in the market?

Speaker 2:

Well, it's honestly, it's my passion to really make sure that everybody understands what they're getting into. I know that the homeownership process and the buying process, pre-approval process, all of it is a little complicated and it's a little tough, but I like to try to simplify things because being a homeowner it shouldn't be stressful. I mean, that's ultimately. The big thing is, you know you're buying a home to live in. It's supposed to be something that you're going to grow your family in and you're going to be happy in, and it shouldn't have to feel like a whole bunch of work and it shouldn't be a complicated process. And so I like to try to simplify things, explain things as best as I can. I don't want to tell people this is what you have to do. I want people to actually see what the differences are. So that way, even you know, five years, 10 years, down the line, when they look to move on to the next home or into the next loan, you know, they know what they're getting into, they know what to expect, and so you know, education is a huge part of what we do here at Healthy Lending, and it is it's something that's very important to me. So, yeah, I think that that's something that I really strive for is just the whole education process, because, you know, being educated is what's really going to help you all the way through your entire homeownership life, which you know is hopefully a whole lifetime, so definitely a lot to look forward to.

Speaker 2:

As far as the clients that I work with, I do. I work with everything from first time buyers all the way to longtime investors, and you know first time buyers it's always exciting. When I was a first-time buyer it was the most exciting time. I went into it already knowing the whole process, so I made sure it was really simple for myself and I got into it, and the day I got my keys I walked in and I knocked on the wall and I was like this is mine, and so I like to pass on that feeling to clients and, you know, make sure that that's the kind of excitement that they get into when they buy a house. So it's always very important to me and I like to be very transparent.

Speaker 2:

I don't like any surprises. Nobody really likes surprises, especially when it comes to money. I think we can all agree that you know money surprises are the worst kind of surprise, and so you know that's always something I like to make sure everybody understands the whole entire dollar figure that goes into purchasing a home before they even start the process, and that's something that I still today the clients that I work with is that's. That's what we really like to look at, is we sit down, we go through estimates and everything, and it makes it a really easy process moving forward.

Speaker 1:

Well, we can kind of touch on that a little bit, because buyers these days are price shopping or, I guess, rate shopping a lot more than they have had to in the past and you know, they might be a little misguided sometimes with some of their prequels that they're getting where they're seeing a certain interest rate and not paying attention to the APR. Paying attention to the APR Can you talk a little bit about that, because I think that's something important for even for realtors to pay attention, to help their clients when they're trying to get the best option.

Speaker 2:

Yeah, absolutely, and so APR is one of those things. It's a very complicated way that they put it together, but basically you have a set interest rate on your balance and that interest rate versus your balance creates your monthly payment. Well, if you take your loan balance and you add in all of your fees, all of the closing costs and everything, and you still continue to make that same payment, so, let's say, your payment is $2,000 a month, okay, and it's on a $400,000 balance. If you have that same $2,000 balance, but instead of a $2,000 payment, but instead of a $400,000 balance, you add in all those closing costs, the APR is actually what the interest rate would be if you were to be paying off all of those extra fees. And so the higher the APR and the larger the difference between APR and interest rate, it can mean that there's a lot of fees that go into purchasing and unfortunately it is something that is not a ethical practice, but it is something that is continuously practiced by a lot of companies and they like to hide a lot of fees and they don't like to disclose a lot of stuff up front.

Speaker 2:

So knowing the APR and what the difference is can actually help save you, especially if you're going to another lender or to another bank and they sit there and say, hey, here's your interest rate and then here's your APR. If you go to someone else, they give you the same interest rate but a lower APR. There's less fees involved, which is very important to keep in mind, because closing costs is money out of your pocket at the end of the day. So it's a very complicated process. It's a very complicated calculation, but ultimately, being aware of your APR is very, very important, because that can really tell you what the fees are. So even if you get something that says you only need a couple thousand dollars for closing, you might want to be aware that if the APR is very high, there could be a lot of hidden fees that aren't being disclosed to you.

Speaker 1:

Well, that's important. When you're a first-time homebuyer, for any, yeah, for anybody, yeah, yeah, it's like people. They barely even understand interest rate. When you're a first-time homebuyer, they're like what's that? Oh, you mean you're going to insinuate my account? What's that? And oh, homeowner's insurance why do I need home insurance? What do you mean? It's like people definitely see all those those elements. So we love sending my first time homebuyers. There's not one first time homebuyer that mike has talked to that doesn't love mike. Yeah, you're so prodigal and patient and deliberate and you know, spend a lot of time in educating people.

Speaker 1:

So, yeah, it's a lot Right? Well, it is. So yeah, there's definitely more that goes into the first time than someone that's already purchased. But I think, whether first-time homebuyer, investors, whatever it's all about, I feel like it shouldn't be all about interest rates. But it's all about interest rates these days. Like, what is the talk on the town? What can you say about interest rates as far as? Like, what is it looking like off the cuff? I know it really has a lot of variables with credit and LTV and all that, but where are we sitting right now? Where do you anticipate us going in your professional opinion?

Speaker 2:

Yeah, no, it's, it's definitely been a wild ride for interest rates. So at the height of this year, interest rates for a conventional loan we're sitting around 8%, which was definitely definitely high, higher than what we've normally seen Right now. Definitely definitely high, higher than what we've normally seen. Right now, interest rates for conventional are sitting about 6.5 to 6%. You know low sixes, you know FHA. You can get into something about mid fives, maybe even high fives, depending on really what you're looking for, but for the most part, we do expect rates to continue to drop. Thankfully, the feds did finally agree and solidify that they are going to do a rate drop this month. In fact, I think it happens in about a week or two. So that's going to be perfect. Most banks have already started lowering their rates because we all anticipate it. Another thing to keep in mind as well is every year, historically every presidential election, every four years, interest rates do drop a little bit, which is always something to look forward to. And then, on top of that, the Fed also announced that they would like to lower rates again next year sometime in the first half of the year. So we do, over the next year or so, we do anticipate rates to drop. I think ultimately the goal is conventional, is going to be sitting about five to five and a half with FHA down into the force, and it is going to be a little bit of time.

Speaker 2:

But one thing I do want to say is don't get stuck on the interest rate, because you know the big thing is you can always refinance.

Speaker 2:

You know buying a home that you really love now is going to be the much better option because, no matter what interest rate you get today, you can always refinance later. And refine is not the same process as buying. You know. Refine, as you know, is a much simpler process. So buying, you have all these inspections and all these fees and all these things you add in refinancing it's handled directly just between, like you know, you and me, and that's, and that's exactly what we like. And it's handled directly just between, like you know, you and me, and that's, and that's exactly what we like. And it's very quick, it's on your own time, there's not a lot of inspections, we don't have to put a whole lot of time into it and the fees aren't very high. So usually refinancing later is always going to be the better option and, especially, you know if it's going to take a year or two years for rates to come down. You know, getting into your dream home now is is definitely the best bet.

Speaker 1:

Well, even with my husband and I picked up a rental knowing that the rates were higher than we like and the yeah, and that the it won't cashflow as well. But we knew, hey, michael, mike will help us get this down, you know, the next year or so and after we do the work on the property, and we wanted to get our foot in the door and get it before someone else, so it was worth it to us. Well, and then you have like a lot. Oh, sorry, go ahead, mike.

Speaker 2:

No, no, no, Go ahead. I'm so sorry that you first. Ok, all right, no, and it's. It's one of those things too, it's. You know, most loans nowadays do not offer prepayment penalties. Most of them are no prepayments. So if you want to refi a month after you buy, you were more than welcome to. You know you could make one house payment and if rates by then are much lower, refinance out of it. You know we, we don't do prepayment penalties, so you're free to refi whenever you would like.

Speaker 1:

I like that Free free to refi Because there's people that are out there that are thinking like I'm just going to wait for the interest rates to drop. There's how many people are out there like that. So then the minute that you, that happens, and then the floodgates open, and then there's the inventory. You know we all know what, like just do what she did, get it now, why it's available and there's not like 60 more buyers out there and you're gonna have like bidding war, a less, a less likely chance of getting that house that you really want. So well, I think. I mean, I know it's regional right With the market, but I think the tide is already starting to turn, even this week, where we've had some listings that are sitting, and now all of a sudden, michelle and I are negotiating three offers on one of them yesterday and it's like okay, here he comes, get ready.

Speaker 2:

It's here for sure. Yeah, and that's the big thing too, is that something that doesn't really get talked about is, as interest rates drop, you start having a lot more buyers, which means a lot more competition, which means a lot higher prices. I mean, we saw it during during 2020 and 2021, you know interest rates dropped to a historic low. You know 2%, 3% was like the average rate and you know it was. It was ridiculous, it was crazy. I mean, it's lowest that has ever been. And you know we saw prices sometimes double in a lot of areas. And so you know that's something to really keep in mind, too is that you know, whatever you buy a house for, that's not what it's just stuck at for the rest of your life. Your value will go up and down a little bit depending on things in the area.

Speaker 2:

So, getting into a home now while interest rates are a little bit higher, eventually you refi out of that rate, refi to something lower, but you're buying a house now while the prices are still low, and that's kind of the big thing, because ultimately, when these buying a house now while the prices are still low, and that's that's kind of the big thing, because ultimately, when you know these rates come down.

Speaker 2:

If you wait, you know you might end up paying more for that house than you might've two, two, three months ago. So, um, yeah, it sounds great to to wait and save on the rate, but you know at the same time, uh, you know, half a percent on an interest rate could be a hundred dollars on your payment. Or you know, now you can go buy a house for $50,000 more, and so it is definitely something it's better to get into it now. You know, real estate's one of those things when rates are high it's the best time to buy, and the reason for that is just flat out it's the cheaper option, because refi later means that you're paying less interest on that home, but you're buying it now at a cheaper price, so ultimately your payment will be lower than anyone else in the neighborhood.

Speaker 1:

So the other thing that I think would be great for you to remind listeners about is obviously getting pre-qualified, as a process doesn't happen in eight hours, right? So there's the element of like just getting that done, because it can take. You know however fast the buyer wants to do it when getting you the information. But let's just say the buyer gets you the information they get pre-qualified. How long typically, will that pre-qualification be good for so that buyers understand how much time they have to just like take their time, tell their real estate agent what their criteria is and really wait for the perfect home? Talk about that.

Speaker 2:

Yeah, so pre-qualification is a little bit of a process.

Speaker 2:

Everybody does it a little different, but as far as pre-qualification goes, it's usually good for 30 days, and the reason being is because if you were to start your loan, get your offer accepted and start your loan today, the pay stubs and bank statements have to be dated within the most recent 30 days, and so that's why it's only good for 30 days.

Speaker 2:

But most of your pre-approval documents, apart from paycheck stubs and bank statements most everything else is good for almost a year. You know there's really not an expiration date on a lot of stuff. So you know, just making sure if you do get pre-qualified, make sure that every time you get paid, every new bank statement that comes out, send it to your loan officer, because that will help keep your pre-approval updated and they can just continuously update that pre-approval date and push it out for another 30 days. So it is very important. Just make sure that as you're going through the process, you don't have to rush the home buying process, but once you're pre-approved, just make sure you send that updated stuff in and you're good to go.

Speaker 1:

We'll just keep updating that pre-approval and don't buy a car, and a hand up yeah, don't go buy a car truck, don't buy any other thing. We actually, we actually experienced someone that didn't do that, um, with one of the offers on our, our listing. They sent it over and they're like hey, it was coming up on a holiday weekend. Here's the offer. We just we don't have their prequalification letter because it needs to be updated and the loan officer's out of town for the weekend, and so, sure enough, it ended up taking quite a while because so much of their documentation was outfired, outdated, and I think it caught that buyer and the buyer's agent off guard. Um, and courtney called that too. Oh yeah, or ferdy was like nothing expired. There's no, and sure enough there was a text I know the problem text that it was actually updated which was in the meantime. Two more offers came in while we were waiting on that.

Speaker 1:

So I'm going to pick up where we left off with Courtney's final question.

Speaker 1:

Yes, so, like I was saying before we wrap up, I just have one question.

Speaker 1:

We don't want to get into politics per se, but it is an election year and both Michelle and I have been asked by multiple people about this bill and as soon as they started talking about it, I'm like, okay, this is from the Dream for All, which we're familiar with, the Dream for All program, but there's a lot of hubbub about this with people.

Speaker 1:

I mean, go ahead, michelle, describe a little bit of what you've been hearing about it. Well, I mean, you just see like the headlines and the in social media and it almost looks a little fake and like to drum up that controversy amongst both aisles of like what and when you really read about it, it's my understanding that it's the same program. It's my understanding that it's the same program, just a proposed bill which still needs to be approved by our governor. But it did pass the Senate on clarifying what this means for people that are non-immigrants, for a program that already exists. So that's my understanding. Um, I don't know if you if I missed anything, but essentially, the senate has said yes, we should allow non-immigrants to have access to this bill, but it still hasn't approved, been approved by government, that's my understanding yeah, so that's.

Speaker 2:

that's pretty much what they're trying to do is they're trying to make it so that the dream for all program is available to, um, any immigrants that, uh, might not be US citizens, might not have a permanent resident alien card, but it really is. I wouldn't worry too much about it. I think that if they do bring that around, dream for All was already a very let's say, very picky program. There's really not any way to put it. It was just it was very hard program to qualify for. I personally never had anyone that actually got approved through it because they were just that stringent on what they would accept. So I think that if it does pass, it's a great thing. We already have loan programs available for anyone that does not have US status or US citizen status or any kind of a permanent resident alien card, so we already had programs available for it.

Speaker 2:

Really, what they're doing is they're making it available. I think the way that they're describing what they're doing is a little funny in wording, but I think really what they're trying to do is open it up to more than just a standard conventional loan. They want to have it so that it's accessible by more programs. So they're very detailed about how they're wording the things in the news, but ultimately that's all they're trying to do is there's more programs than just a conventional. There's FHA, there's VA, there's USDA, there's four national bank statement programs, stated income. There's all these programs out there. So by allowing a new group of people to be qualified for it, they're just really opening it up for new programs to be used, which is, I think, that's a great thing. It just opens it up for more people to have this homeownership kind of reality, something that they never would have had before.

Speaker 1:

Got it.

Speaker 1:

I was just confused. I'm thinking, especially having just gone through the lending process as a buyer which is always a good thing for a realtor to do to be reminded of how it changes over time. My gosh, it's changed so much since I became a loan officer 20 years ago. But I'm thinking you've got to provide your driver's license. They check your tax returns. I guess they don't. You don't necessarily show. I can't remember if I showed you my social security card. I'm trying to think how do you qualify someone without that status? That part I don't understand. So I guess it's a different type of loan. Is what you're saying?

Speaker 2:

Yeah, it's a different type of loan. The paperwork is fairly similar. So usually if you don't have a social security card so if you're not a permanent resident or a US citizen, typically you don't have a social security card, of course, but what you can get is a tax number. So you actually get a identification number. Usually it's issued, I believe, by the IRS and they will send you this number and that's what you use on your taxes, which, whether you're a citizen or not, you still file taxes, and so that's something that we still, of course, have to prove is we still have to show income and everything. So there are still there's still taxes that have to be done, but you don't have to be a citizen or resident to still file those taxes so um that's, however they can exactly, yeah, so there's still ways to show it okay, it's political the whole thing.

Speaker 1:

It was just all to drum up people saying that's ridiculous and all the comments without having this. What three minute conversation about race?

Speaker 2:

well, they made it very political in the news yeah, yeah well, yeah, they could have lied a little bit better yeah, yeah, that's it.

Speaker 1:

They could have worded it better.

Speaker 2:

Well, welcome to California yeah, and that's that's kind of my big note about news is never live, never listen to.

Speaker 2:

Note about news is never listen to the news.

Speaker 2:

Don't ever listen to the news, and the reason being is because the news only says things in a certain way to make you click it and open it, read it online, watch TV.

Speaker 2:

You know they make it into a comment to where they want to get you energized about it and get your attention and really draw you in, because they make money off of you watching their news or you know they get money off of you looking at their website and so you know, be very careful when you watch the news. News reporters are not real estate or lending professionals, so anything that comes out online, absolutely consult a professional in that field. So you know, if they say home values are dropping, call a real estate agent, because I guarantee you that they'll know more about the values in your area than than the news reporter that's probably on the other side of the state. So it's definitely, yeah, don't don't believe too much what you see on there, because they do. They want to drum up that energy and really get your attention, but it's all usually a pretty normal process that they're trying to do.

Speaker 1:

Well, mike, thank you so much for one shedding light on that and two just joining us today. If we have any listeners or realtors that want to send clients your way, where should they go to find you? Also, where do you do business, what, oh yeah.

Speaker 2:

Oh yeah. So yeah, I'm only in state of California for now, working on other states pretty soon, but I do business throughout all of California, there's no limitations. So, from north to south, from east to west, and, yeah, you can reach me. You can find us on our website, healthylendingcocom, and you can jump on there. You can even apply right now. You can fill out an application, start the pre-approval process. It's got our office number. It comes directly to me here in my office. You know, if you ever need to get a hold of me mikeathealthylendingcocom, you can send me an email. Feel free to reach out at.

Speaker 2:

You know, if you ever have questions about the process, you know, even if you're not looking to get started today, reach out to me because we can at least work on a plan to get you ready to buy Home buying.

Speaker 2:

It's not something that you just wake up one day and say I'm going to go out and do this. It's a process to get to, so I'd be happy to help you and walk you through everything and get you to that point. And real estate agents if you have a client that's a little on the fence or you know you feel like what they're getting might not be the right thing. Let me know, because I'd be happy to let you know what I see on my side. You know, honesty and transparency is the biggest thing for me. So you know, even if I could just, you know, help solidify that what they're getting is a really good deal, I would like to at least give you that peace of mind so that you know that what your buyers are walking into is is a really great thing. So, yeah, just let me know. If you ever need anything, healthy lending cocom or Mike at healthy lending cocom, you can send me an email anytime.

Speaker 1:

Yeah, if you've liked what you've heard on this episode. What are the? What are the students to do? Well, we're still figuring out how to have you guys give us a review, because we've been. Multiple people said that they would, so anyone knows how to help us get a five-star review on Apple or Spotify? Try and let us know. Yeah, yeah, maybe we'll send you a gift card or something or reach out on Instagram. We need reviews On all things. Twist and Ask the General and everyone. Have a great day Later Bye. Have a great day Later Bye.

Speaker 2:

Have a great day, thank you.