Pathways with Amber Stitt

Focus on Money: Mortgages, Markets & Dating your Rate

January 31, 2023 Amber Stitt
Pathways with Amber Stitt
Focus on Money: Mortgages, Markets & Dating your Rate
Show Notes Transcript

This episode focuses on Mortgages and how this plays a factor in the Market and your passive income strategies.

Richard from AZ Lending Experts has over 20 years of being in the business. He has experience with the trends in our markets and he shares updates on what is trending today.

As you all know, investing in Real Estate has been a hot topic over the last few years and now there is a large focus on adjusting mortgage terms among having higher rates. But this hasn't been the first time Richard and I have seen this happen. We will share more about that here!

His team focuses on what is best for each individual client and he discusses many helpful tips in this Pathways episode.

Topics in this episode include:
-What if you are self-employed and have a lot of write-offs?
-Is this an investors market?
-Can remote workers qualify for new homes?

If you are truly interested in using your Mortgage as a solution to your Planning, make sure your mortgage broker walks you through all the options as some buyers' needs are different from others. It isn't just about the rates!

For more mortgage tips, please follow Richard and his team at  @AZ Lending Experts, LLC, and their profiles on Instagram and Facebook.
@richardsimonhomeloans

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Amber 0:15
Hello and welcome to The Amber Stitt Show! I am your host Amber Stitt and today we welcome back my friend Richard Simon, back to the show. Thank you for being here, Richard.
So for those of you that haven't met Richard yet on a previous episode that we have on the podcast, he is the co-founder of AZ lending experts and we're diving into the topics of housing, how to get money, smart, focusing on money, and I thought the topic of really the market. I mean, you can't go wrong with that topic these days. So I thought I would just have the audience in the way of how to prepare for things like this because you and I have seen a couple of rounds of the market changing in our lifetime and we're not too old, but you never get we've known each other for 20 years. So I mean, we've seen a little bit in our experience. And so in our last episode, we talked about mortgages. And terms of how to really think of that as a tool for retirement. But today, I feel like I'd like to call them some nerves if possible and talk about what we have seen, especially through your eyes as people are coming to you. Probably with a different attitude. than previously, like in the last six months. So let's start I'll pass the mic and let you talk a little bit about what easy lending experts do. But then let's dive into some of what you're seeing based upon your experience from the past to the present.

Richard 1:44
Sounds great. So again, I'm a co-founder of AZ lending experts, been in the mortgage industry from about 2000 to 2003. Worked with Amber years ago. And we actually worked together up until I think the market crash is really when we were working together. So we saw the crash of 2008 which was one of the biggest housing crashes that we've ever seen. And I've lived through that. So certainly has some experience in regard to the ups and downs of markets to the real estate market. So yeah, there's a lot to share in our market, changing quite a bit this year alone, so excited to talk
about it.

I mean, there's a lot of noise but that's fair. And there's a lot of information out there. So I guess we could start with is there a way to really recession-proof our lives because I think they say that by the time you even know you're in a recession by the time they post the numbers you're probably already in when I think that's what's happened to us. And so I don't know that everyone's felt the same. I mean, is there a way to really recession-proof when we're when it comes to investments in real estate?

I think there is. I mean, I think the biggest thing to keep in mind is you know so many people think like oh, we have to time the market. And I think that's a huge misconception. Right? I don't think at the time getting into the market. I think it's more important to time getting out of the market. And when you time when you look at timing getting out of the market, if you're diversified. Sure, you might need to get out of one market when it's down.

 But if you're diversified enough, you have other opportunities to get out at the very top of mind, you know, and I'll give a brief example of that back in 2007. I bought a house in 2007 300 to 5000 for it, and this is right when the market crashed, and I remember looking at that house a year later, that same house was worth like 170 576,000 And I'm like, oh boy, I'm gonna do now. But looking at it today, that house is worth almost 500,000 So if I just said I bought a house in 2007 And today it's worth 508 for 305 and today it's worth 500,000 You'd look at it and say great investment.

Amber 3:55
I feel like we do have to be a little patient we live in a world we have so many options and custom immediate gratification and we just have to let things kind of take their course I did have my securities licenses and I no longer have those licenses. I'm fully insurance planning. But when I talk with my colleagues that still manage money, they do say you can't time the market. And we want to believe that I mean, there's just a little part of us it's like if I just do this one thing, but overall historically, we can see even when I go do charting and we're looking at historical, like the drawdowns, there are a lot more ups than there are downs and I think it's just it's it can be really emotional. It's bad, it just feels so much worse. But if we can kind of be patient with ourselves, but back to diversifying, and if I take it back to the principles of pathways of peak performance, I mean, if we're building money goals based upon the personality that we all have as an individual, applying principles that will help us you know, stay up within really good habits, then diversifying real estate can be one of those amazing things and so if this makes any sense. How do you feel the phrase: Is cash is trash? Have you heard people say that? Basically, you don't want to just cash out they're sitting out there so I'm sure some planners will say you know you need to have three to six months of a cash cushion. And I say that also for those of my clients that have disability insurance, there are waiting periods, and for those will kick in. But I'm glad it's funny that you're laughing about that. I read that somewhere online. I think what they're alluding to is that real estate is one of the few things you can actually put money into the generally built equity. I mean, would you agree with that?

Richard 5:49
I think passive income too, you start to look for certain investments and investment opportunities where you can, you know, put your money into and that you're not only going to have the potential for you know, equity growth but that you can also you know, cash flow monthly if you're renting the place out if you're doing it live Burbo long term rents. There are a lot of options to make passive income.

Amber 6:20
I mean, you're gonna talk more about VRBO commercials and some of that based on your experiences and what you have done personally, with your clients as well. But would you agree that strategies when it comes to this, thinking about financial planning and lending and mortgage and leverage, do you have to be super financially sophisticated to do these strategies? Can somebody dive into this and not have a financial background?

Richard 6:40
You certainly can. I mean, I think you know, if you're at the point where you're ready to invest and you start looking at different investments, whether it be real estate or investing in the stock market. You already obviously you're already pretty smart, you know, to be thinking and planning that way. And so I tell people, a lot of times you just have to trust your instincts. You have to trust your gut. You don't need to know everything, but you'll know enough you'll be able to tell yourself, is this a good investment? It's a good investment. Even when you're listening to all the outside influences. People just need to listen to themselves right? 

Amber 7:10
There's something that you say that always there's some sentence that you say that comes back to race. Do you know what I'm talking about?

Richard 7:20
When I say that you marry the house, right? And that's just because oil prices are going to create a lot of buying opportunities for people. Some people are hesitant to get into the market because of interest rates nobody knows for certain what interest rates are going to do. This is because this could be as bad as it happens right? So rates gonna be high you buy now interest rates drop you refinance to a lower rate, great. More, you have a much lower payment which allows for a lot of different options with regard to that property. Let's say they don't let's say that they keep going higher. You're gonna be glad you bought it now it's great, right? So you're not necessarily tied to the rate but you always have insurance when it comes to race or buying a house with every

Amber 8:30
When we worked together, many people were buying a lot more homes than they can afford. With a lot of people working from home. It makes sense. Did you see a lot of people going bigger than they probably should? But we're not talking about any client
was it before now like it was before?

Richard 8:40
I think this was stated loans left and right. I mean, standard loans were the way that people would say, obviously stay away and come up with a house they can because they wanted to flip that house they want to buy and hold it for a couple of months and then just turn around and sell it right away. That's what a lot of people were getting into the market to. Yeah, so they really didn't care. They wanted the biggest house possible because they figured that was going to give them the biggest return they were going to make the most money on those homes. I haven't really seen that this time around most of the people that I've been helping, you know, buy homes for the last several years. You know, we usually have the discussion of this is the max you can qualify for but what are you comfortable paying, and then we'll kind of bring that down into where the comfort level is. And that's where they actually go out and start looking for a home. Yeah, and in our previous episode, we've talked about some of those strategies to kind of lay it out on the table and probably look at what's the max but you try to find some lower and assume that it's not such a hot market that you just have to keep throwing up these crazy numbers just to win the house. But going back a little bit, what is it literally you say I make 80,000 a year. And then they run the credit score. How do they do that using to be that way? So it's not that way any more student loans now. We really don't have student loans now. I mean, the closest thing to for someone who's self-employed, they're now allowing their bank statement loans, or they can actually instead of using downside for a self-employed person who now has to show tax returns and the average out of the two years based on their income, business tax return as well. Anybody who owns a business knows the goal of one of the goals or privileges of being self-employed is the benefits. You get to write off as much as you can because you're taking the risk of owning and running the business. So the IRS gives you certain write-offs that you can take and show a little bit of a lower income. When it comes to qualifying for a house that really hurts a lot. So they've come up with a product where for someone who's self-employed, they can actually use those statements and they'll look at deposits over the last 12 months or last 24 months, but actually use that as income in order for somebody to qualify.

Amber 10:57
Yeah, I was hearing on Clubhouse and a couple of other places that the self-employed, there are some additional opportunities for that income is it still needs to be within the same profession for two years to allow for that to your average. generally, employed? Yes. Okay. Yeah, with disability insurance when I have residents or fellows go to practice. They are private practice 1099 Or maybe they have some 1099 and work with hospitals, and they always what does that mean? I need a P&L?

What is so even if they're not writing off a bunch, there are some times and insurance on the writers they might factor in a percentage of expenses for the 1099 person even if they're not writing oftentimes some emergency medicine they just contract they're not writing businesses and building so they can surprise people? But yeah, that's good to know that there's I mean, obviously since times have required more documentation makes sense to have proper loan guidelines now. But yeah, we had talked about loan terms and then just other things you can do to kind of look at the picture today. And then, you know, even I guess a good question for you, too, is with the great resignation, meaning a whole bunch of people has gone out of work, not necessarily to just not work, they might have changed businesses. Have you seen a lot of people come in with a job change in the last two years?

Richard 12:29
We have? I mean, one of the things that we've seen as we've seen a lot of remote workers moving to Arizona, I mean, it's one of the markets we look at certain markets, you look at the affordability of a market, you know, especially from an affordability standpoint, back in maybe the end of 2020. We saw our marketing people come from California, Washington or Oregon. What they're doing is they're just moving to San Francisco's example, right? Someone who maybe not be able to afford a home in San Francisco, just because prices are so high out there. They can actually come to the Phoenix market. Very nice home here, and they're looking at jumping on a Southwest flight if they ever need to go back for a meeting, you know, every now and again, that cost them nothing so that they can have this nice home for their family. But we've seen a lot of that we've seen a lot of people that have moved over and have come to Arizona because they're now working with these people then take the difference of that mortgage, what they're used to, or maybe some equity from the California home and buy a second home for two things that are probably a lot of what we're seeing or what we've seen as far as driving up home prices are a lot more people have come into the market become investors, you know, in the real estate market over the last couple of years. That's played a lot into the low inventory that we had, you know, buying frenzy that we saw, so it certainly played into

Amber 13:52
Interesting. So I think just to wrap this up today, I always like to take a proactive approach with the planning and it comes from starting with yourself kind of seeing how you handle things on the homefront. How organized Are you know, what are things that we can do to really just know our behaviors? So we're not super emotional with the things that can happen in the market? Because I think both of us could agree that this is not going to be the last time. So how do we make smart decisions based on the tools and resources that we have? And I know that your team is very helpful to really walk people through it and not just you know, sometimes with online brokers, it's just, you know, numbers, and then that's all you get, but I feel like you have some counsel there and you guys, both you and your partner we haven't talked about Scott and Scott for a long time to really dive into looking at the whole picture. And you guys also have some fun approaches on our YouTube channel too that people can check out when it comes to I think you post things that are up and coming so there's some market news on your YouTube channels as well. So how else can people find

Richard 14:58
We are on YouTube. It's easy Lending Experts LLC. There's also @RichardSimonMortgage on YouTube we have both Facebook and Instagram accounts, Facebook and Instagram, myself assignment home loans, etc you find that we do I mean we take we try to take a different approach in a general sense. We believe mortgages are boring. Most people don't want to learn or know about a mortgage unless they have to. So we try to just like everyone wants to talk to us.
So we try to add a little fun to the education piece of it. Just to give them you know, try to capture and hold attention for a little bit. Longer.

Amber 15:35
Well, I appreciate your attempts. And it's great to always connect and talk about not so many war stories. We just have things that happen and we'll get through them but we just have to take it. I think Be a little patient. Use the tools and resources and maybe keep it diversified. Can't go wrong there. Right. Okay. So we'll have more to come in future episodes, but for today, I think that's a great place to land Thanks, Richard. Thank you for joining us on today's episode of the air

Thank you for listening!

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