Get the best interest rate with no money out of your pocket
We have previously discussed 2/1 buy down programs, how they are used, and how they help buyers secure a low interest rate in a high interest rate environment and today's episode is going to be building on top of that knowledge by going over a brand new type of 2/1 buy down program that helps even more buyers get into homes with that low rate. To go over all the details of this new program I sit down with Dennis Angstrom from E-mortgage capital and he breaks down the numbers for you as well as when this program may and may not be a good idea for buyers to take advantage of.
To reach Dennis you can find him at:
E-mail: dangstrom@emortgagecapital.com
Call/text: 949-945-4964
Josh Alexander
THE brokeredge
JoshAlexanderRealEstate@gmail.com
714.366.2186
DRE#:01974435
Want to get a monthly update on your home’s value? https://hmbt.co/FpQZKP
Thinking of buying a home, want to know the process and costs involved? - http://vid.us/kk81kx
Thinking a selling your home and want to know the process and costs involved? - http://vid.us/7j8wtf
Want to schedule a time to talk? - calendly.com/joshalexanderrealestate
Follow me on Facebook at: https://www.facebook.com/joshalexanderrealestate/
Follow me on Instagram at: https://www.instagram.com/josh_the_real_estate_dad/
Follow me on LinkedIn at: https://www.linkedin.com/in/joshalexanderrealestate/
LinkTree: https://linktr.ee/joshtherealestatedad
Don't have access to audio or would you rather read, the full conversation is below:
Josh Alexander
Hey everybody, on today's episode, we're going to be discussing yet again, one new brand new loan program that's going to help buyers secure a much lower interest rate and today's high interest rate environment without any money out of their pockets. Now, if you've never watched the show before and don't know what a two one bite down program is, I highly recommend you go back to one of my latest episodes, where I discuss it in a lot more detail, because today's episode is going to be building on top of that. So if you don't know what a two one buy down program is, and you're watching this on YouTube, feel free to check out the video right up here, I linked it above. If you're not watching this on YouTube, just go back a few episodes, and you can search for the one that's titled The most popular loan product on the market right now. And that's gonna give you everything you need to know about two one loan buy down programs, as well as some examples so you can get better understanding of when it's used. Now in today's episode, I'm going to be talking to Dennis from E mortgage capital. And we're going to be going over a brand new way in a brand new type of two, one loan buy down program that's going to again, help buyers secure a much lower interest rate without any money out of your pocket. And we're gonna go over some examples of exactly how this works. So you can better determine if this type of loan product would be a good fit for you. So let's go ahead and get into it.
Josh Alexander
Hey, everybody, I want to go ahead and welcome Dennis from E mortgage capital today. Dennis, thank you for joining us on the show.
Dennis Angstrom
Thank you for having me.
Josh Alexander
Absolutely. So we're doing I'm talking to a lot of lenders lately. And I wanted to bring you on specifically because we just had a conversation what was it yesterday, the day before. And there's a new product out there that you are offering that I think might be helpful for a lot of buyers right now. So we've talked about to one buy downs on the show before and kind of a little bit about what that is. But one of the biggest disadvantages of these two one bite Downs is that the seller always had to pay the cost of these buydown. So your program that you were telling me about is now allowing lenders to cover some of these costs. So I just wanted to kind of go over what that exactly is how this kind of works, and just give us some more information about it. So buyers can understand that there are programs out there where if the seller decides I'm not paying for anything, you have to buy the house that it is or maybe they'll pay for a little bit of the buy down, but not everything, there's still options out there for them to be able to use this product to get into the house. So can you kind of give us an overview of what the to one byte program is a little bit but more in lines of how exactly lenders are going to be able to use this credit to be able to help buyers out.
Dennis Angstrom
Yeah, exactly. So just like you're saying earlier, it was mainly seller concession we can use to do this by downs. Now they actually updated most lenders updated and allowing us to use this a lender credit also, and we can actually use a realtor credit as well. So or any interested, you know, third party in the transaction so we can use not only seller concession, right, so because that
Josh Alexander
we gift funds and stuff for like, someone's parents wanted to contribute a little bit of money to help them buy down the right is that something that's doable as well?
Dennis Angstrom
I mean, that would go more towards I would just use that as a normal gift in that case. But but it Yeah, mainly lenders and and realtors that can help answer on certain purchases that we see now. Like we we don't get a full seller concession maybe we you know, let's say we need 14,000 In seller concession and to do a vida, maybe they can only get that, you know, maybe the seller say no. So that's when it's good then to use the rest, for example from the lender or from, you know, from their realtor, you know, whatever, whatever we can do to make the deal happen, you know? Okay,
Josh Alexander
so can we kind of go over some of the scenarios, people can actually see what their monthly mortgage payment would look like. So obviously, with the lender paying for some of this, I'm assuming there's going to be some costs involved, whether it's a higher percentage rate or there's more fees involved to be able to do this. So can you kind of give us an example of let's say, maybe the lender has to pay five grand tours or something like that five grand towards this buy down program. What does that do to the overall mortgage payment every month to be able to get this done? Versus the seller having coming in with everything?
Dennis Angstrom
Yeah, so we could definitely look at that. So let me pull up should we use $100,000 purchase for example, then with a 20% down if we wanted to use 10 to one buy down with Lender Paid so this on 640 loan amount to one buy down meaning that first year is 2% lower than what we lock in? Let's say we locked in today. So let's say the rate is Six and a half, right now, first year they're gonna, the buyers are gonna have a four and a half percent rate. Second year they're gonna have a five and a half percent rate, then third year they're going into the six and a half percent that we locked in, most likely we, you know we refinance them by then most likely right if I think that rates are gonna come down before that happens, so yeah, let's use that a lender paid it would cost than the actual bidaan costs is 14,500 roughly. So let's say that this seller only gives 9000. Okay in concession, then, you know we would have to use the rest from the from the lender rate would on that be about 7.125. Okay, compared to a six and a half if the seller can come up with everything right. So it's going to be a little bit higher just because we need to go up and rate to get enough lender credit to cover the full, the full buydown in monthly payment on that. Six and a half percent rate compared to 7.125 is around $260. Roughly. Okay, that's the difference in my payment. That's definitely, yeah, so, you know, quite a difference. You know, but but if you can't get it right, if you, you know, it's either doing the Lender Paid or not do it at all. Okay, all right, because if this organization isn't there, we can't cover it unless we use some of the lenders. So you could today and you still get a starting rate of 5.125. Which is way better than anything else out there.
Josh Alexander
Yeah. And then. So with that, on the higher rates of basically the if you do have to have you come in with a little bit of money on the lender side of things, then the buyer needs to qualify, I'm guessing at that higher 7.1% interest rate in order for them to continue with the loan, would that be correct? Correct?
Dennis Angstrom
Yeah, correct. We always go off with the actual rate, not the buyer down, because how it really works is that the credit the seller credit, or the lender credit or whatever, you know, however, we set up the loan is basically being put into a separate account with the lender, like an escrow account, you know, and then, you know, whatever the buyer is paying every month, then the lender takes then a lot of piece of that escrow account to fulfill the full payment. Gotcha. You know, so they still are technically on the seven 7% rate or in this case, right? It's just that some of it is being paid from that escrow account each month. Okay.
Josh Alexander
Yeah, and we've talked about this on the show before, but that's kind of one of the big reasons that this product might not be for everybody, especially those that have a large downpayment. Because you can basically take the same amount of money, if the seller is unwilling to give it to you, or if they are giving it to you maybe and use that towards closing costs and something else, and then just take that money, put it into account and pay the extra couple $100 a month and effectively do the same type of thing. So
Dennis Angstrom
yeah, you kind of set up your own your own bidaan In a way,
Josh Alexander
yeah. And then you can put it in an account that at least gets at least some type of maybe interest on there. So you're making a tiny bit of money while sitting in that exact manner. Okay. And then. So that to one byte and program, it seems like that's probably the most popular program right now that most people are using to try to get these rates a little bit lower. while they're waiting for rates to come down. Obviously, you're getting approved at the higher amount. These are not variable interest rate. So I'm kind of I've talked about this before in the show, as well as it's not something that you don't know what your interest rates going to be in two or three years, you know exactly how much your payments are every single year, and you're going to be qualified off the highest payment. So for those of you thinking, this is 2008, all over again, where people all sudden had payments skyrocket, they couldn't afford them anymore. This is not those type of programs, this is just helping you for the first two years to be able to get that lower rate in hopes that as history has shown when a recession starts to happen, typically, interest rates are going to come down by the end of the recession, which is what a lot of people are banking on right now. And it's happened to 100% of all the recessions since 1980. However, it's not a guarantee. So you always want to make sure as a buyer, you're comfortable with that higher payment
Dennis Angstrom
on Yeah, I think that's important to what you're saying right there you you're not gonna you know, that's the buyer don't think about the lower payment or the you know, what a great payment and you know, that's the maximum I'm comfortable with paying you have to Yeah, ya know, think about like, what worst case right? years from now, what's the payment I'm gonna have that it's not something I'm gonna be able to afford or not.
Josh Alexander
Exactly. And then one thing that I haven't brought up a lot, but it's something that you want to bring up as well is that if you go to refund let's say, let's say home prices do start to continue or continue to drop because they are dropping right now in a lot of areas not significantly but a little bit and they continue to drop for the next six months and also And six months from now you want to refinance? Well, if you purchased a home and your home was now worth a little bit less, even if it's not by much, trying to refinance is not going to be an easy thing to do, because your home is gonna be worth less than the loan. So you have to understand, too, that if, if home prices continue to fall, these products do work. But you have to be careful because it's not an automatic that you're going to be able to refinance, if you don't have the equity in your home to be able to do so without bringing in another lump of cash to be able to do is that pretty much in line with what you're telling people?
Dennis Angstrom
Yeah, correct, especially with people that putting in, you know, a lower down payment, let's say it's 3% or 5%. Right, then it's a little bit riskier. If if you know, home prices continue to drop, that was coming in with 1% or more, right, they are a little bit safer. Because even if home prices dropped, so they don't have the 20% equity anymore, they might still have 15 or 10% equity, right? So we can still refinance them, the only thing that would happen is that they would have a little bit of mortgage insurance, which might still be a better option, drop the rate and have mortgage insurance compared to the keeping the higher rate, so there's always options we can look at.
Josh Alexander
Okay, perfect. Yeah, so that's just something especially those using a lower down payment, just to keep in your mind while you're going through these programs on there. Now, the other thing that I did want to bring up is that we you also have programs out there that are three to one. So these ones are not going to make sense for everybody, because they tend to be more expensive, like we talked about off camera, but can you kind of go over a little bit about the three to one programs, and maybe when it might make sense for someone to look at one of these programs versus the two one by downs.
Dennis Angstrom
Yeah, absolutely. Like you're saying it's a lot more expensive, is basically twice to twice that amount. To buy it on that 3% first year, and then two years, 2% one and 1% at the third year, only time, it really would make sense, if you get that solid credit, or if you know, I wouldn't really use the, you know, the lender credit on these, because their rate gets, you know, it's up there. So I wouldn't, you know, they, it's gonna be a pretty expensive, expensive loan. So unless you can get a seller concession, or potentially, you know, a realtor pitch in or something, then I wouldn't go for this one that you want. This is enough, in my opinion, the three to one is pretty expensive. If you go the Lender Paid option,
Josh Alexander
okay, so this might be good for someone that again, might be bringing doesn't have a lot of cash on hand, might be bringing in a lower down payment, but they can find a great deal get a seller to maybe be able to cover instead of 14,000, I think you were saying it's it could be close to like 28 $29,000, something like that. So if the seller is in a position where they need to sell, and they need to give credits, and they just want to get rid of the property, this could be an option for those buyers that are putting a low downpayment in to be able to get a really low interest rate for the first three years basically. And then that gives you a little bit more runway to refinance later on, because you have a lower rate for three years instead of two years. So I would say that I mean, in my mind, those are probably the most desirable type of buyers to look at these programs are the ones that have those low down payments, that are finding those properties out there. Especially as we go into the holiday season and where you're having a lot of sellers at this point, trying to debate should I keep my property on the market? The holidays? I mean, it's Thanksgiving at this point when we're recording this next week. So do I want to keep my house on the market when I have family and friends over and we have open houses and people walking through my house? A lot of people are at that point where they're saying, Should I sell if I do, maybe I'll take a little bit of a discount at this point just to get it off so I can get it sold before the holidays. So there's there are those type of deals out there right now, especially with sellers being a little bit scared on what's going on, you could find the right opportunity that would be able to make this make sense for you.
Dennis Angstrom
Correct? Yeah, we definitely do that out there. It's a it's a buyers market right now, we have, you know, a lot of a lot of price reductions, a lot of a lot of seller credits, but we've also seen and just, you know, that's why the lender is coming out with this that, you know, sometimes the seller credit isn't covering the whole thing. So that's why they do this change. Okay.
Josh Alexander
So yeah, that's that's basically seems kind of to wrap this up is that this is just one more option. And one more way out there where if you do find the right home, and you aren't able to get the full seller credit, they're still available options. Now, what you didn't have a few months ago where you can kind of structure it where you can have the lender come in with some extra money or a realtor coming with some extra money to be able to get you into this house, get that lower rate for the first two or three years depending on the program and be able to get you into a home in the hopes that you can refinance later. And again, you just want to make sure you're comfortable with the higher payments. So I think that pretty much wraps up everything I wanted to talk about. Like I said, I just wanted to bring you on because it was a kind of it was something I haven't heard of yet in terms of lenders being able to credit this so I want to make sure that everybody that's thinking about buying a home in the next couple of months at least knows these type of programs are out there. So do So what is the best way for people to contact you if they want to get some more information about these programs or just want to have maybe have a general conversation about the whole pre approval process? And just get that started? How how's the best way to reach out to you? Yeah,
Dennis Angstrom
email or text or call works? Maybe you can drop it in the in the notes section or pop it up on the screen so that the extra money mortgage capital law comm or my phone number 949-945-4964
Josh Alexander
here. Okay, perfect. Yeah, and I'll put that in the comment section or bio or depending on where this is posted on there. So you can find this information reach out to him if you have any other questions about the whole process. He did a happy to help you out. So Dennis, thank you again for joining me today. I really appreciate it. And until next time, everybody stay healthy, stay happy and I will see you on the next show. Bye.
