Texas Real Estate Update: Streamline Refinance Tips and Rate Insights

(0:00) However, this week should be another really big one when it comes to interest rates. (0:04) As the Fed's favorite measure of inflation, (0:06) PCE or Personal Consumption Expenditures, price index will be reported for the month of June. (0:11) Now, the expectations are that this metric likely fell in June, (0:14) mirroring a trend seen in different inflation reports earlier this month.

(0:17) And if that result matches expectations, you could expect to see rates fall even further (0:21) and give more confidence to the fact that the Fed will make its highly anticipated (0:24) first rate cut in September. (0:26) So keep an eye out for Friday. (0:35) Well, hello to all you real estate rainmakers out there.

(0:38) This is the Texas Real Estate and Finance Podcast, (0:40) market update for the week of July the 23rd. (0:43) And I am your over the hill housing hero and host, (0:47) Mike Mills, a North Texas mortgage banker with Geneva Financial. (0:50) And I'm here each week to spill the tea on the latest real estate gossip and news.

(0:54) And today is no different. (0:56) So interest rates are coming down and maybe coming down even more very soon. (1:01) Thank you, sweet, tiny baby Jesus.

(1:02) Now, this is the great news that we've all been waiting for, but it might be at a cost. (1:06) I'll tell you what that might be. (1:07) After that, I'm going to tell you some good news related to housing affordability.

(1:11) And although headlines might be trying to tell you that a housing crash is imminent, (1:14) it is very unlikely. (1:16) But what is likely is a little relief for home buyers from these escalating prices. (1:21) I'm going to tell you why a buyer's market might be coming our way (1:24) sooner than you think, especially here in Texas.

(1:26) And if you're holding off on buying a house for now, (1:29) but thinking about getting a car sometime soon, (1:31) I'll tell you why the best time for that might just be right around the corner. (1:34) I also have some big news for employees looking for a new job. (1:37) I'll tell you why it might've just gotten much easier for you to make that employment change.

(1:41) I've also got a few thoughts to share on all the recent chaos around the presidential election (1:45) that we've experienced over the last week. (1:46) And finally, I'll discuss another underused loan program that could help your recent buyers (1:51) get some relief on their high mortgage payments. (1:53) It's just one more piece of knowledge for your real estate arsenal.

(1:56) So stick around to the end for that. (1:57) However, before we get started, if you find today's episode helpful at all, (2:01) then you can help me out in two ways. (2:03) Number one, give me a little feedback on how you guys think we're doing here (2:05) by liking, commenting, subscribing, or sharing this episode with a friend.

(2:09) Or number two, if you have a client who needs help navigating this increasingly (2:12) difficult process of getting a mortgage, then send them our way. (2:15) Both of these things help us further our cause (2:17) to bringing you these episodes each and every week. (2:20) And of course, are always appreciated.

(2:22) So share the love, help a guy out. (2:24) Okay. (2:25) First out of the gate today, as always.

(2:27) Hey, Mike, what are the rates? (2:28) Well, according to mortgage news daily, as of July 23rd, 2024, (2:31) the average 30 year fixed conventional mortgage rate is about 6.87%. (2:36) The average FHA 30 year rate is about 6.33%. (2:39) The average 30 year VA rate is about 6.35%. (2:43) The average 15 year conventional rate is about 6.32%. (2:47) And the average jumbo rate is around 7.05%. (2:51) So after a good week last week, (2:52) rates finally got below 7% on average for the first time since April of this year. (2:56) There was a small pullback in the bond market, (2:58) causing rates to go up just slightly on Monday. (3:01) But this kind of rebound is pretty common after consecutive days of improvement.

(3:04) However, this week should be another really big one when it comes to interest rates. (3:08) As the Fed's favorite measure of inflation, (3:10) PCE or personal consumption expenditures, (3:14) price index will be reported for the month of June. (3:16) Now, the expectations are that this metric likely fell in June, (3:19) mirroring a trend seen in different inflation reports earlier this month.

(3:22) And if that result matches expectations, (3:24) you could expect to see rates fall even further (3:27) and give more confidence to the fact that the Fed will make (3:29) its highly anticipated first rate cut in September. (3:33) So keep an eye out for Friday. (3:34) Now we've all been waiting for rates to start that decline (3:36) downward since the middle of 2022.

(3:37) We're already two years into this higher rate environment thing, (3:40) much longer than most, including myself, anticipated. (3:43) But here we are. (3:44) So with inflation starting to show real signs of falling, (3:47) and maybe even more than reported, (3:49) and the job market continuing to really struggle with all of this, (3:53) it's the perfect recipe for rates starting to come down.

(3:55) In fact, last week, new job listings declined over 12% (3:59) from this time last year to their lowest levels since April of 2021. (4:03) And overall, US job postings are down 50% (4:06) since their December of 2021 record openings. (4:09) Part-time jobs are up, but full-time jobs are down.

(4:11) In fact, in June of 2024, the number of full-time workers fell by 38,000, (4:15) while the number of part-time workers increased by 50,000. (4:19) And according to Bloomberg, the total jobs in 2023 (4:21) were likely overstated by 730,000. (4:24) And all of this is just further indications that this economy is not strong (4:28) and most likely started its real decline back in October of 2023.

(4:32) It's just going to take time for these numbers to bear themselves out (4:35) when all the estimates get cleared out by actual data. (4:38) And that takes months and months to aggregate. (4:40) So if you want low rates, it looks like they are coming.

(4:43) How low though remains to be seen. (4:45) It really just depends on how bad things get. (4:47) However, just know this.

(4:48) Historically speaking, when the Fed starts cutting rates, (4:51) that time is typically when the economy gets to its worst place. (4:54) So rates may come down, but historically speaking, (4:57) that is not good for the overall economy. (4:59) So as always, we got to be careful what we wish for you.

(5:02) All right, right now it's kind of a weird spot for housing. (5:04) So I've been saying for a year or so now that (5:05) you shouldn't see a significant shift down in home prices (5:08) until we start climbing out of this five-year inventory hole that we've been in. (5:12) Based on recent data, it looks like that might start to be happening.

(5:15) Now I've got some numbers I want to share with you for the nation, (5:17) but also here for Texas specifically, because recently here in the Lone Star State, (5:21) we've seen some big jump in inventory over the last couple of months. (5:24) But I do want you to keep a couple of things in mind. (5:26) Number one, this time of year is when we do typically start to see inventory increase.

(5:30) So having a jump in inventory as we head out of the summer is not very unusual. (5:34) Number two, a lot of this available inventory is coming from new construction homes, (5:38) many of which were set in motion to be built eight to 12 months ago (5:41) and are now coming online available for purchase. (5:43) Number three, many of these builders that have this excess inventory (5:47) have dramatically cut back their new permits and starts going forward, (5:51) at least until they start to see a dramatic change in rates (5:54) and people getting back into the desire to buy, (5:56) because they still remember 2008 also and have no desires to repeat the mistake (6:00) of having a huge burst in new home inventory like they did then.

(6:03) And right now the current months of supply of new home inventory is about 9.3 months, (6:08) but that includes homes that aren't fully ready to move in yet. (6:11) Because according to the National Association of Home Builders, (6:13) only 21% of that number are homes that are actually ready to be moved into. (6:16) That's about a hundred thousand.

(6:17) So keep all this in mind when we're considering some of these national numbers. (6:21) And the last thing to keep in mind is that we are at historic lows (6:24) when it comes to buyers active in the market and submitting applications. (6:27) So all of this goes into the effect of these housing numbers.

(6:31) So nationally last week, we actually saw a pretty big jump in inventory. (6:33) According to Mike Simonson from Altos Research, (6:35) inventory jumped 2.6% this week to 668,000 single family homes unsold on the market. (6:42) Now that's 16,000 more homes compared to this time last week.

(6:45) And the biggest one week change this year, (6:47) but also less of a jump than what was happening this time last year. (6:50) Because again, this is the time of year when we typically see these spikes in inventory. (6:54) And although we have seen rates slip below 7% in many cases, (6:57) that's still not enough to get many home buyers back heavier into the market (7:01) to start eating up some of this additional inventory.

(7:03) Simonson also states that this week we saw 69,000 new single family listings unsold, (7:08) and that's 8% more than a year ago. (7:10) There were another 15,000 new listings that were already under contract, (7:13) which is very low for immediate sales recently. (7:15) But remember, last year was characterized by an extreme shortage of sellers, (7:19) and we only have 3% more sellers total this week than this time last year.

(7:24) So the growth is still small. (7:25) Now, while unsold inventory is climbing, (7:27) it's more from a lack of demand than it is from a massive supply surge. (7:31) And Simonson does note that we've had a surprisingly strong economy for the last two years.

(7:35) And if that does change, which in my opinion, (7:38) it's going to, and maybe more dramatically than I had originally predicted, (7:41) then at least from his point of view, we could break out of this lower listing pattern. (7:44) Right now, the median home price is around $450,000, (7:46) which is unchanged from last week and unchanged from a year ago. (7:49) But 38.6% of homes this week took a price cut, (7:52) and that is up a little bit from last week.

(7:53) So all this means is that right now, prices aren't crashing. (7:56) They're just kind of flattening out. (7:58) We've already seen most of the appreciation that we're probably going to see this year.

(8:01) And the expectation for the rest of the year (8:02) is that price appreciation is expected to be somewhere between zero to 2%. (8:06) Now, the bigger stat to watch is the pending sales numbers. (8:09) These are homes that are currently under contract.

(8:10) Right now, there's only about 62,000 new pending contracts this week for single family homes. (8:15) And that's 9% fewer sales started this week than a year ago. (8:17) And while mortgage applications did jump up a little bit last week (8:20) because of the decline in rates, (8:22) we are still at the lowest levels that we've seen since 1993.

(8:26) Yes, that's right. (8:26) We have the lowest amount of mortgage applications that we've seen in almost 30 years. (8:31) That's crazy.

(8:32) So the market is cooling and inventory is growing, (8:35) but mostly due to the fact that fewer and fewer homebuyers are willing to take the plunge (8:38) with these high rates, high prices, high insurance, and high taxes. (8:42) But the more inventory added could cause some of these prices to come down some. (8:45) And with possibly lower rates by this time next year, (8:48) that could also help out massively with affordability.

(8:50) It's just going to be a matter of how much inventory we actually have available (8:53) when the rates do actually start to come down. (8:55) Because if inventory is still constrained, (8:57) then when rates do dramatically fall, you could expect to see prices jumping. (9:00) So we'll just have to keep an eye out for that.

(9:01) Okay. Now what about Texas? (9:03) Well, the inventory picture gets a little bigger here in Texas, as all things do. (9:07) So according to a second quarter report from 2024 from the Texas Realtors Association, (9:11) the number of active listings from April to June (9:14) were up almost 41% compared to the same period last year.

(9:17) Now months of supply, (9:18) which measures how many months the current supply would take to run out, (9:21) given the pace of sales also increased. (9:23) It grew from 3.1 months in the second quarter of 2023 (9:27) to 4.6 months in the second quarter of 2024. (9:30) And this is the highest amount of supply in the state that we've had in almost eight years.

(9:34) But despite the rise in supply, (9:36) the statewide median home price showed nearly flat growth, (9:39) raising just under 1% year over year to 345,000. (9:42) However, sales were down 3% compared to the second quarter of 2023, (9:46) falling to just over 93,000 in sales. (9:48) Now this trend does vary depending on different metro areas in Texas.

(9:51) In Dallas, for example, (9:53) active listings were up 44%, pushing the months of supply to 3.8. (9:56) Houston inventory was up about 43% and months of supply grew to 4.2. (10:00) San Antonio listings jumped 43.4%, (10:03) bringing their months of supply to a little over five. (10:06) Now Austin, on the other hand, (10:07) has experienced a little bit less of a jump in active listings (10:10) with about 30% annualized increase and about a 4.8 month of supply (10:15) at the end of the second quarter of 2024. (10:17) But the housing market in Austin has been cooling quite a bit (10:20) since all the flurry of activity that occurred in 2021 and 2022, (10:24) whereas other major areas in Texas have been a little more stable.

(10:26) Now cities in South Texas and along the Gulf Coast (10:29) are showing elevated levels of months of supply (10:31) relative to other parts of Texas as well, (10:33) with Beaumont at 5.2, Brownsville at 7.2, (10:36) Corpus Christi at 7.1, and McAllen at 6.8, (10:39) each outpacing other statewide numbers. (10:41) While markets in more remote areas, (10:43) particularly in West Texas, (10:45) are substantially different than the rest of Texas. (10:47) Median home prices in Odessa were up almost 12%, (10:50) Abilene was up 11%, (10:52) San Angelo was up almost 9%, (10:55) and Midland was up 6%.

(10:56) And supply in Odessa grew by a relatively modest 14.8%, (11:00) bringing their months of supply right around 2.1. (11:02) So in big metro areas in Texas, (11:04) it is cooling off as far as demand, (11:07) which again would be expected (11:08) since it was one of the hottest states (11:10) that people were looking to move to during and after COVID. (11:13) So what comes up must come down. (11:15) That's how this stuff works.

(11:16) And with lack of buyer demand, (11:17) because of the high rates, (11:18) it's fueling higher inventory, (11:20) just like everywhere else in the country. (11:21) But all that means is that there are deals to be had (11:24) if you are just looking in the right spots. (11:26) Texas is on its way to becoming a buyer's market (11:29) instead of a seller's market.

(11:31) So let your buyers know. (11:32) All right, speaking of buying, (11:34) are you thinking about buying a car sometime soon? (11:36) Well, since I'm a mortgage professional, (11:37) I have to make sure that you don't do it (11:39) when you're in the process of buying a home. (11:41) You really wouldn't actually believe how often that occurs.

(11:42) But aside from that, (11:43) this fall will most likely be one of the best times (11:46) to buy a used car that we've seen in quite a while. (11:49) So the average used car was listed (11:50) for about $25,251 in June. (11:53) And that's down about $400 from May's price (11:55) and more than 1,700 from last year.

(11:58) And truck prices overall are now down 17.5% (12:00) since their peak in 2021. (12:02) And that's the largest decline that we've seen in 15 years. (12:04) In fact, over the last 35 years, (12:06) there were only two times when prices of used vehicles (12:09) saw a bigger drawdown in 2004 and 2009.

(12:12) And overall, U.S. wholesale prices for used vehicles (12:15) have declined for 22 consecutive months, (12:17) with EV makers being hit the hardest, (12:19) having some prices fall over 40% since last year. (12:22) But remember, interest rates on these cars still remain high, (12:26) which still makes it harder to qualify (12:27) for a loan on these cars. (12:28) Now, new vehicle prices have mostly held steady (12:31) despite the drop in used cars.

(12:32) The average new car buyer in June paid about $48,644, (12:37) which is just about $266 more than it was in May, (12:40) and only about $307 lower than in June of 2023. (12:44) But as many of you know, (12:45) car insurance premiums have also spiked up. (12:47) So high rates, but most likely declining, (12:50) higher insurance, but mostly on newer cars, (12:52) but lower car prices.

(12:53) So when should you look to buy? (12:55) Well, typically from October through January 1st, (12:57) dealerships are trying to meet their yearly quotas (12:59) and may offer big discounts and incentives during that time. (13:02) And December is often considered (13:03) the cheapest month to buy a car, (13:05) but you might have fewer options to choose from (13:07) as their inventory starts to decline. (13:09) Also, end of the month and end of the quarter (13:11) are good times to buy.

(13:12) Similarly to the end of the year, (13:13) dealerships may have sales goals (13:14) that they need to meet at the end of each month or quarter, (13:16) like March, June, September, and December. (13:19) And holidays like Labor Day or Memorial Day (13:21) might also be good times to buy a car. (13:23) You may also have auto dealers (13:24) giving good deals on Black Friday.

(13:25) So overall, cars are still expensive, (13:27) but they are the cheapest (13:28) that they've been in quite a while. (13:29) And oh, by the way, (13:30) if you can pay cash for a used car (13:31) and not have to finance it (13:33) and just carry liability insurance (13:35) because you don't have a loan on it, (13:36) then the end of this year (13:37) might be a really excellent time (13:38) for your next car purchase, (13:40) if you're in the market. (13:40) So keep an eye out for those deals.

(13:42) Okay, with the economy starting to turn down (13:44) and jobs not at the plenty right now, (13:46) there has been a recent change (13:48) to a long-held policy (13:49) that restricted workers (13:50) from making changes to employment (13:52) based on their current employer's rules. (13:54) But that just came to an end. (13:55) So are you familiar with non-competes? (13:57) Well, if not, (13:59) a non-compete is a contract (14:00) between employers and employees (14:02) that restricts employees (14:03) from working for competitors (14:04) or starting a competing business (14:07) within a certain timeframe (14:08) and geographic area (14:09) after leaving the company.

(14:11) So the original idea (14:11) was to protect employers' business interests, (14:13) such as trade secrets, (14:15) client lists, (14:15) and other proprietary information. (14:17) And typically these non-competes (14:18) would often range from six months (14:19) to two years (14:20) after leaving your previous employer (14:22) if you sign. (14:23) However, recently the Federal Trade Commission (14:25) or the FTC proposed a rule (14:27) to ban these non-compete clauses (14:29) for most employees (14:30) across the United States.

(14:31) This move aims to make it easier (14:33) for workers to change jobs (14:34) and increase competition in the labor market. (14:36) So why is this a big win for the employee? (14:38) Well, first off, (14:39) it gives increased job mobility. (14:40) You can switch jobs within your profession (14:41) much easier, (14:42) leading to better opportunity and higher wages.

(14:44) It enhances the competition between employers. (14:46) You see, companies must compete (14:48) more aggressively to attract and retain talent, (14:50) which can lead to improved working conditions (14:52) and innovation. (14:53) It also makes for fairer employment practices.

(14:55) You see, many non-competes (14:56) have been criticized for being unfair, (14:58) especially when imposed on low-wage workers (15:00) who have little access (15:01) to sensitive information anyway. (15:03) And limiting these agreements (15:04) helps protect workers from being unduly restricted. (15:07) And really it's been argued (15:08) that these will help economic growth (15:09) because when workers can move freely between jobs, (15:11) they can contribute to a more dynamic (15:13) and robust economy.

(15:14) Companies overall benefit from a larger talent pool (15:16) and employees can use their skills (15:17) where they're most needed, (15:18) driving up overall productivity. (15:20) However, as is the case in many situations (15:22) of businesses versus employees, (15:24) an injunction was filed in a Pennsylvania court (15:26) that would block the rule put into place (15:28) on April the 23rd. (15:29) However, today it was announced (15:30) that the injunction was denied.

(15:31) And as of right now, (15:33) all non-compete agreements with employers (15:35) will be banned and voided (15:37) beginning September the 4th. (15:38) So if you had to sign one of these (15:40) and it's limited your upward mobility in your industry, (15:42) then you are free at last. (15:43) So get that resume ready.

(15:44) All right, I'm not gonna go deep into all this stuff (15:46) with the presidential election (15:47) because it really doesn't directly relate (15:50) to what we typically talk about here. (15:51) You know, now depending on (15:52) who ultimately does get elected, (15:53) it will impact us. (15:55) But that is another discussion for another day.

(15:57) So as everyone knows by now, (15:58) there was an assassination attempt on Trump (15:59) on July the 13th. (16:00) And right now there's a ton of controversy (16:01) around how and why it happened (16:03) with the Secret Service at the center of this controversy. (16:05) And on Sunday, Biden officially bowed out of the race (16:07) for his second term as president (16:08) with Kamala Harris, at least for now, (16:09) being the presumptive Democratic nominee.

(16:11) Except no one really voted for her to be, (16:13) but no one was really allowed to run against Biden (16:14) in the primary process anyway. (16:16) So I guess that's just kind of how Democrats do it now. (16:18) It just kind of lets you know (16:18) who they're gonna nominate.

(16:19) And if you're a Democrat, (16:21) you just kind of have to jump on board, I guess. (16:22) But regardless of that, (16:23) I do think things might get a little crazier (16:25) between now and November. (16:26) Because as you can tell from the national media coverage, (16:28) no one with money or power in this current system (16:31) wants Trump to win, (16:32) except I guess maybe Elon Musk.

(16:34) But otherwise, the powers that be, whoever that is, (16:36) certainly don't want Trump running this thing. (16:38) At least that's how it appears. (16:39) Right now, I don't think there's many out there (16:40) that feel like Kamala can beat him anyway.

(16:42) So I do think there are still more moves to be played here. (16:45) What they are, I have no idea. (16:46) But what I do know is that this economy (16:48) that we're living in right now (16:50) is not as strong as we keep hearing about (16:52) in the corporate media.

(16:53) And if Trump does win, (16:54) which at least for now, it appears like he will, (16:56) then my guess is right after that, (16:58) you're gonna start to hear how bad things really are (17:00) with jobs, GDP, spending, and corporate balance sheets. (17:04) And at that time is when we might actually start to see (17:06) things really start to take a bigger turn for the worse, (17:09) at least as far as the economy is concerned. (17:10) Because once they do admit that it's all in the toilet (17:12) and then hand it all over to Trump (17:13) for him to try to figure out how to make it all work (17:15) and ultimately just say it's his problem (17:17) and his economy going forward, (17:18) that's when I think we may start to see some big turns down.

(17:21) Look, we're living in some really, (17:22) really weird times right now. (17:23) And maybe every generation has experienced stuff like this (17:26) and it just seems more intense (17:28) because I'm an adult living through it right now. (17:30) But I really can't remember any time (17:32) where things have seemed to be in this much turmoil.

(17:35) My hope is is that we can just make it (17:36) to the other side of this relatively unscathed (17:38) because we've done it before (17:39) and I am sure that we can do it again. (17:41) At least that is my hope (17:42) and that is what I'm going to continue to believe. (17:44) So here's the stability and sanity (17:46) for the rest of 2024.

(17:48) And that's all I have to say about that. (17:49) All right, and finally for today, our main story. (17:51) So there is a simple low cost option (17:54) for your clients who recently purchased a home (17:56) using an FHA, VA, or USDA loan.

(17:59) And in most cases, it doesn't even require (18:02) that they get an appraisal (18:03) or even qualify with their income. (18:05) These magic loans are called streamline refinances. (18:08) And I'm going to tell you how they work (18:09) and how you or your clients can qualify for them.

(18:11) Now, recently on the show, (18:12) I've been talking a lot about different types (18:14) of refinance loans available to consumers. (18:16) And most of you guys out there listening are realtors. (18:18) And you might ask yourself, (18:19) Mike, why should I care about this? (18:21) Well, number one, it might apply to you (18:23) if you have one of these types of loans.

(18:24) But more importantly, your goal as a realtor (18:27) should be to have a little bit of knowledge (18:29) and information about anything related to real estate. (18:32) You should know a little bit about insurance. (18:33) You should know a little bit about roofing, (18:35) a little bit about title, et cetera, et cetera, et cetera.

(18:38) Because you need things to post (18:39) on your social media sites on a regular basis (18:40) to make sure that you stay in front of your clients (18:42) as often as possible. (18:43) And when your friends, family, and past clients (18:45) give you a call to ask you questions, (18:47) you want to have some answers. (18:48) You don't have to be an expert, (18:49) but the more information you can give, (18:51) the more that they will always think of you (18:53) when it comes time to buy or sell their next home.

(18:55) Because after all, you are their real estate Yoda. (18:58) All right, so what is a streamlined refinance? (19:00) Well, a streamlined refinance (19:01) is a simplified refinancing option (19:03) available to homeowners (19:04) with existing government-backed mortgages (19:07) such as FHA, USDA, and VIA. (19:09) It aims to lower monthly mortgage payments (19:10) or change the loan terms with less hassle (19:13) and fewer requirements (19:14) compared to traditional refinancing.

(19:16) So how are the requirements less? (19:18) Well, one of the biggest perks is reduced documentation (19:20) because the need for income and asset documentation (19:23) in most cases is not required. (19:25) Next, in most cases, (19:26) the borrower will not need to get another appraisal, (19:28) and this makes the process much faster and cheaper. (19:31) Now, there are some cases with a streamlined refinance (19:33) where an appraisal is required, (19:34) but I'm gonna touch on that in just a moment.

(19:36) And of course, having a cheaper refinance is always nice (19:39) because in many cases, (19:40) you can do a streamlined refinance (19:41) and not bring hardly any funds to closing (19:44) or even not have costs rolled into your loan at all. (19:47) So you can literally do a refinance in this case (19:49) with no income or asset documentation, (19:52) no appraisal, and no costs at all. (19:54) So that's a free refinance, right? (19:56) Well, yes and no.

(19:58) Look, nothing ever is free. (19:59) No bank is ever gonna do free refinance for you. (20:01) They may tell you that, but it's not the truth.

(20:03) Anytime you refinance, there's gonna be title costs, (20:05) recording charges, credit reporting fees, et cetera. (20:07) However, in some cases, (20:09) the lender can offer you a slightly higher rate (20:11) than you otherwise would get and cover the costs for you. (20:14) So you're paying more in your interest rate (20:15) than you could if you covered the cost yourself.

(20:18) But sometimes if the rate difference is low enough (20:20) and it doesn't cost you anything to do the loan, (20:23) it still might make very good sense. (20:25) It really just comes down to the math. (20:26) Now, if you wanna get the lowest rate that you can get (20:28) in this type of refinance (20:29) and the costs involved you feel are worth it (20:32) to get that lower rate for the term of your loan, (20:34) you have two options.

(20:35) If you don't wanna get an appraisal, (20:36) and there are many reasons why you may not wanna do this, (20:39) maybe the house hasn't appreciated much since you bought it (20:41) or maybe you bought a new build (20:43) and got a ton of incentives (20:44) and the appraised value just wouldn't get you (20:45) to where you needed it to be, (20:46) then you can just bring these costs out of pocket to closing (20:49) and pay them without increasing your loan balance. (20:51) However, if you feel that your home would appraise enough (20:53) to allow your costs to be added to your loan, (20:56) then you can just pay for the appraisal (20:57) and have those costs added with no problem. (21:00) And when I've done a lot of these in the past, (21:01) I often would suggest to go the appraisal route (21:03) because it made it possible to add the cost to the loan, (21:05) allowing for nothing out of pocket (21:07) and for the lowest rate possible.

(21:08) But if we're in a declining rate market, (21:10) which we kind of are right now, (21:11) and maybe for the foreseeable future, (21:12) it's possible you could lower your rate just half a point (21:15) and not have to come out of pocket at all (21:17) or add any cost to your loan. (21:18) And in that case, (21:19) you're knowing that rates may still come down (21:21) more in the coming months or years (21:23) and have it make sense to refinance again. (21:25) And in that case, (21:26) doing the no appraisal route could make more sense (21:28) because even though your rate is slightly higher (21:30) than you would get if you had the cost rolled in, (21:32) you aren't adding any additional costs to your loan.

(21:34) That allows you to plan on refinancing again (21:36) sometime in the near future (21:37) without continually adding costs to your loan (21:39) every time you do this. (21:40) So it really just depends on the circumstance. (21:42) Now, who can do these streamlined refinances? (21:44) Well, anyone with an FHA, USDA, or VA loan.

(21:48) These are called interest rate reduction loans for VA (21:51) and as long as they're current on their mortgage (21:53) and haven't had a 30-day late payment in the last 12 months, (21:56) then they would be eligible. (21:57) And a reminder again, (21:58) you don't have to do these refinances (21:59) with your current servicing bank. (22:00) Any lender can do these for you.

(22:02) Now, if you have a conventional loan (22:03) or got behind on payments in the last year, (22:05) then you would not be eligible for this type of refinance. (22:07) You also cannot access any equity with these loans. (22:10) You can only reduce your rate and your payment.

(22:12) And in most cases, (22:13) if you want to add to, (22:14) or even sometimes shorten your term (22:15) for the loan that you have currently, (22:17) then you may have to go the appraisal route regardless. (22:19) Again, it just depends on what type of loan you have (22:21) and what you're planning on doing. (22:23) So streamlined refinances can be a great option (22:25) for a low cost, low hassle refinance (22:27) to help your home buyers who purchased (22:29) in the last couple of years (22:31) bring down those high monthly mortgage payments.

(22:33) And just know this, (22:33) as rates start to come down (22:35) and they look very likely to do this in the coming months, (22:38) your clients will be calling you (22:40) and asking you if now is a good time to refinance. (22:42) And that gives you the opportunity (22:44) to start asking questions. (22:45) Why are they wanting to refinance? (22:47) How's the house coming along? (22:48) How you like in the neighborhood? (22:49) You never know where these conversations can lead (22:51) because it could actually lead to them wanting to move.

(22:54) Or because you're so knowledgeable (22:55) about all things related to real estate, (22:57) they're now sending you their best friend (22:59) who is also looking to buy their house. (23:00) You see conversations about real estate (23:02) lead to transactions. (23:04) So the more conversations you have, (23:06) the more transactions you're going to do.

(23:08) And if you're looking to find out more (23:09) about these types of loans, (23:10) give me a call. (23:11) I'm happy to help. (23:11) And now you know.

(23:12) Well, my friends, that is a wrap for today's episode. (23:15) I hope each one of you have the great rest of your week (23:17) and join me back here again next week (23:19) to keep on keeping on, (23:20) even through all this chaos. (23:22) On Thursday, I'm going to welcome Dan Habib (23:23) from NBS Highway to the show.

(23:25) Dan and I will go deep on mortgage rates (23:27) and what to expect the rest of this year (23:28) and into next. (23:29) He's a wealth of knowledge on this stuff (23:31) and I get a lot of my content from their show. (23:33) So this is one episode you don't want to miss.

(23:35) But until next time, (23:36) be great humans and keep grinding (23:37) because life is what you make. (23:39) So make it great. (23:40) Take care.