Ep 16 - Navigating Interest Rates and Home Loan Strategies With Jared Bahr

Jared Bahr: [: 00:00:00

Voiceover: Welcome to Metcalf Money Moment. The [00:00:15] podcast unlock financial clarity and confidence with expert insights to achieve your goals. Hosted by Jeb Graham, Ethan Hutchinson and Eric Wymore. Each episode offers decades of combined expertise in wealth management. [00:00:30] Retirement planning and more. Join us for practical strategies to inspire your financial journey.

Now your hosts

b Graham: welcome to Metcalf [: 00:00:45

And, uh, pretty good guy. So how you guys doing? Doing good, man. And I was just kidding about beating you in golf, but I have before. Yeah, we'll talk about it. We'll talk about it some other time. Well, hey, uh, [00:01:15] it's really good to have you on Jared. And, um, you know, I think for our clients today, what we're really hoping to do is maybe put some clarity around mortgage lending.

ad years and years of people [: 00:01:30

Rates, I know everyone [00:01:45] always watches every month to see if Jerome Powell's gonna lower the federal or funds rate and then, you know, kind of expect that to equate to mortgage interest rates going down. And the reality is may maybe they have some correlation, but it's not necessarily, uh, exactly what's driving it.

et's talk a little bit about [: 00:02:00

Jared Bahr: Yeah, and I'll back up real quick. You said it's been a crazy last couple of years in the mortgage industry. I'd say it's been a crazy last 12 to 15 years. I mean, oh 8, 0 9, we [00:02:15] had that, the housing recession, that kind of started all of the madness.

then everyone started buying [: 00:02:30

And we raised them at a rate I don't think we'd ever seen before. So you're right, [00:02:45] it has been a very, very crazy time in the mortgage business. Um, not only with regulation is as far as the interest rates, but yeah, the, the number one question I hear is what are interest rates and what are interest rates doing and what can I get a home loan at what rate today?

So. [: 00:03:00

And so what that correlates to us is our adjustable rate mortgages, and an adjustable rate mortgage can be on a three year loan, a five year loan, seven year loan, 10 year, and that's the fixed period. [00:03:30] And we can ize that on a different timeframe, right? So what we're saying that 3, 5, 7, or 10, that's how long that interest rate is fixed on the front end, and those are the rates that are tied to the federal funds rate.

erome Powell says he's gonna [: 00:03:45

Mm-hmm. We stall that 10 year actually go up and when that 10 year treasury note goes up, 30 year fish rates go up. 'cause that's the cost of funds that, you know, we're, we're, we're trading off. Um, now the reason [00:04:15] that was. We think is that the markets didn't thought it was too early to start cutting rates, right?

when the Fed does cut rates [: 00:04:30

Eric Wymore: Yeah. Yep.

Ethan Hutcheson: I think so. For the most part.

That's a loaded question, but Yeah. Right.

Eric Wymore: We're close.

Jared Bahr: We're close.

Eric Wymore: Yeah, definitely. Well, according

Jared Bahr: to a lot of [: 00:04:45

Jeb Graham: Yeah, that's right. It has definitely, yeah, it's, it's definitely cooled out over the last, it was really that two year window where we saw inflation really, really jump kind of after COVID, and since then it's normalized.

But the challenge, [: 00:05:00

So, yeah.

at translate over to loaner, [: 00:05:30

Um, simply because that rate's gonna be lower [00:05:45] and we're expecting rates to come down, and either way, we're gonna refinance that. So you're gonna hear a lot of people in the market right now that say, uh, marry the house, date the raid. Have you heard that before? Does but rates do tone down? [00:06:00] Just refin. You wanna talk about.

The prices go just skyrocketing again. I mean, it's, we're gonna, we're gonna see the house really developing value. Yeah,

that excited about buying it [: 00:06:15

And it actually is create, creates a financial crunch or, or challenge for people to be able to do that. But the reality is, I didn't think about the fact that, you know, when you guys do lower rates, I mean, I guess houses continue to go up [00:06:30] at even a faster rate, which. Right, which to me is kind of crazy just in general of how, how expensive houses are.

p into Roland Park and buy a [: 00:06:45

Maybe what kind of solutions we'll see for that in the coming [00:07:00] years. Yeah.

rong with it, but if you are [: 00:07:15

So. You can always buy the house now with a higher rate, [00:07:30] refinance later and, and save. That's, that's the way to do it. So. Gotcha.

Jeb Graham: What does Brian Buffini say? Don't, don't wait to buy real estate. Buy real estate and wait, is that his deal? Right. Have, have you ever heard that before? Yeah.

Jared Bahr: Yeah. It makes sense.

I mean, [: 00:07:45

Jeb Graham: Right. You haven't in the past? Yeah. Eric, you you wanna ask that question about that? Yeah,

know, infl or, uh, homes are [: 00:08:00

Automatically into that, that jumbo loan [00:08:15] loan value. Are there different tiers for, for lending? Is it a like a traditional value and then maybe a jumbo loan? Can you kind of touch on that? Yep. So the main loan

nd anybody under like a loan [: 00:08:30

The maxed informing loan amount was right around 380,000. Then it was like 417,000 for the longest time, and then today it's [00:08:45] 820,000. So that's how much the, the conforming loan amount has increased. And when I say conforming loan amount, that's the loan that Fannie Mae, Freddie Mac, uh, those are the ones that the government's gonna to take on and, and government subsidized so that, um, people can, you know, have [00:09:00] those parameters to play in.

r secondary market investors [: 00:09:15

Right. And that's one product that we really excel in at, obviously, because we're a bank, right. Uh, we're not a correspondent lender. We're not a brokerage. We're not selling everything [00:09:30] off to the secondary market. We make our own loans and by doing so, we lend our own money. We take your deposits, we turn around and we lend them out on the other side.

cost of funds, right? And so [: 00:09:45

'cause it's, again, it's our own funds. We underwrite it, we [00:10:00] process it, we service it, we close it. All of it's with us. So once you close a mortgage with us, it stays with us for the long term.

ery three months to pay your [: 00:10:15

Right. 'cause it's getting sold and sold and sold again. It just kind of stays with you guys.

at issue. We are, uh, artist [: 00:10:30

So we've uh, we've got some lending power. That's awesome. Nice. That's cool. Yeah.

ot a lot of clients that are [: 00:10:45

Uh, and then, you know, we have some, you know, very high income, like complex, uh, more complex clients. What talk [00:11:00] about just maybe some non-traditional. Mortgage strategies that, that you're using in the high net worth space and, and retiree space?

Jared Bahr: Yeah, so another advantage of us being a bank, we get to get creative.

We set our own underwriting [: 00:11:15

I can take that monthly distribution and consider that income, and if it's not quite enough, then we can increase it to show that they can't afford that house. And if they don't want to ultimately [00:11:45] take that 'cause people live differently. Mm-hmm. Some people don't mind using the majority of their money towards a house payment.

ind of tweak it so to speak. [: 00:12:00

Mm-hmm. Or say, Hey, you know, this is a good way to, to pay the loan. At the end of the day it's called a TR ability to repay. That's what we're looking at as a bank. Can you [00:12:30] repay this mortgage? Mm-hmm. And so either it would be the assets IRA monthly distributions. Um, if you're self-employed, we're gonna look at other options.

that back as income for us. [: 00:12:45

Ethan Hutcheson: Mm-hmm. That's cool. I didn't know that. [00:13:00]

n things that you need to do [: 00:13:15

Ethan Hutcheson: Yeah. And if I could

Eric Wymore: add

redit card or go get an auto [: 00:13:30

Are there any little nuances between the two of those, uh, demographics? [00:13:45]

e these crazy guidelines and [: 00:14:00

So. Being upfront and honest with your loan officer is the best way to start the whole process. What's going on? 'cause what I need to know is I need to know your entire financial picture. Where's your money coming from? I, I, I have a sheet that I send out that [00:14:15] just tell me about your income. Tell me where it's coming from, how long have you been receiving it, because that's what underwriting wants to know, right?

ts, mattress money. You know [: 00:14:30

That's, that's where we've gotta source money or just gifts from family members. It's fine to get a gift from a family member. We just wanna know where it came from and we're gonna have that family member say, Hey. [00:15:00] You are not obligated to repaid it. This is not a loan, this is a gift, right? 'cause what we're all factoring in is your debt to income guidelines.

we're putting you on a home [: 00:15:15

[00:15:30] Yeah. Or, you know, the, the big house, the big custom homes. We wanna make sure that we're putting you in a good situation. A lot of what you guys do when you're picking, you know, investment strategies and stuff like that, well, hey, yeah, we all wanna get rich quick, but we gotta, you know, we gotta, we gotta make sure we're doing what, [00:15:45] what's best for you.

And so when we're looking at that, we wanna make sure that that housing payment is realistic for you.

Disclaimer: Mm-hmm. I get

, [: 00:16:00

Well, you don't make as much as you think you do. So it's, it's really, we've gotta be the backstop that sets them out for success by putting them in the right mortgage and put and setting those realistic expectations. Um, but as far as the first time home buyer goes, [00:16:30] you know, one of the really big do's and don'ts, if you're really considering buying a house and you've got a car that runs just fun, don't go buy a new car two months before you're gonna get that loan application, right?

income ratios. Um, you know, [: 00:16:45

So I would say if you're done it, buy a house, kind of put everything else on pause, talk to your loan officer before you make those changes to understand how it's gonna impact [00:17:15] your ability to purchase that home.

Jeb Graham: Gotcha. Yeah, that makes total sense. Hey, so I had one other question, and this is actually a unique kind of scenario that I've run into recently.

as well. So I'm assuming you [: 00:17:30

So in our world, you know, you guys do [00:17:45] HELOCs. We have what are called SP locks. I had a client just, which is a securities based line of credit, right? So I just had a client a couple of weeks ago who needed, who had that, that very situation. He was getting ready to buy a new house, but he, he's not gonna be able to sell his other house till three weeks later or whatever.

[: 00:18:00

He gets the money, he pays an interest rate over that three weeks, he pays it back and then, and then, and then it's gone. Can you talk a little bit about other ways that people, uh, that run into that situation? [00:18:30] What are some other solutions to that and how do you guys deal with that? Yeah,

Jared Bahr: well, it. First of all, it's a convenience factor that people want to do this, right?

ady. 'cause it's, it's, it's [: 00:18:45

Um, so it, there is the convenience factor that makes a lot of sense that if you don't have to sell that [00:19:00] house to purchase the new house. Why do it, right? Make life easier, keep your wife happy. But at the end of the day, if we go down that route, well, we certainly wanna use some of that equity to get to the down payment because what we don't want to do is we don't wanna start pulling from our, [00:19:15] our investment funds and then taking those taxes, right?

done in a couple of days and [: 00:19:30

We're just gonna take that equity out and they only pay interest on the, the amount of money that they're pulling out. We're gonna take out that equity, put it out [00:19:45] on their primary residence, and then once they sell their old existing house, we can take that existing equity after we paid off the primary, after we paid off the heloc.

the principal balance and if [: 00:20:00

Mm-hmm. And will reset their payments based on that new outstanding balance of 400 based. Got it. Versus paying on that big loan that they just had. Right. Because. They're at that retirement age, they're not trying to heck keep that monthly payment. [00:20:30] It's, you know mm-hmm. Probably as high as they, it would be knowing that they have that equity that they'll roll over.

Gotcha.

e limit, but, uh, wanted to, [: 00:20:45

Keep it going and, and maybe have you on again someday in the future. [00:21:00] So let's do it. Let's do it. Think when rates

Ethan Hutcheson: are back in the twos. Yeah. Hey, when rates are back, rates are back in more,

Jeb Graham: then we can go after all those refinances, right, right. That's right, that's

Disclaimer: right. It's there you go.

Jeb Graham: Well, well, very good.

Well, this has, uh, been a [: 00:21:15

Voiceover: Thanks for tuning in to Metcalf Money Moment, the podcast. We hope today's episode provided valuable [00:21:30] insights to help you unlock financial clarity, confidence, and peace of mind. For more expert advice and resources, visit metcalf partners.com. Until next time, make every money moment count.[00:21:45]

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