Yes, in your life count and enthusiasm definitely makes a difference.
Hello and welcome, your live on the Sudden Eye Impact Show, which I always lead, coming
to you from the DFW Metroplex.
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apply in any area of their life to change their life for the better and continue to work to
change their life for the best.
Today, we have a special guest for you today, and his name is John Mallet.
He is a mortgage and housing industry expert, speaker, and author of the Complete God of
Home Ownership by your first home today.
John has the unique ability to demystify the complexity of home loans and financing into
easy and understandable concepts.
With no further ado, we bring Mr. John Mallet to the stage.
Good morning.
How are you, John?
Great to be with you.
I'm doing great.
Great to be here with you.
Glad to have you.
Why don't you share a little bit of your story with us and then we can just dive in and
educate the audience on the process?
Okay, you bet.
You know, to kind of give you a little bit of a background for me, it really kind of
starts with a time I was in New York and I was promoting my book, and it was the first
time that I've been to actually, you know, doing something with promotion for the book.
And I had the opportunity to go and give my pitch to literary agents, to publishers, and
people like that.
And I had three and a half minutes to do it.
I lined up about 80 pitches over three days.
And so I went the first day, and I basically said, Hi, my name is John Mallet.
I'm doing a book on mortgages, and this is what I'm all about.
And that first day, I was totally just shut down.
I mean, it was just like it was just unbelievable.
There was just, I went away from there.
In fact, there was one guy that I talked to, a literary agent, he said, You know what?
What you have, nobody's going to want to have.
They're not going to want to read it.
So there's really no reason for you to even be here.
And so I was with my wife and I felt like, Man, we might as well go home or go see a
couple of shows and then leave.
And then I got to my room that night and I began to ponder and the thought came to me
that I needed to tell my story.
And I thought to myself, You know, nobody wants to hear my story.
That's the most ridiculous thing in the world.
But I was so desperate at that point, and so wanting to be able to make this work, I
thought, Okay, I'm going to throw it.
Every, all the pitches, I'm going to throw everything that I prepared for that they
told me how to do correctly, quote, unquote.
And I'm just going to tell my story.
And so the next day I went up to the first agent and I said, Hi, my name is John Mallett.
I grew up in the projects.
My parents were divorced when I was eight years old and we moved to another town and
we were evicted on several occasions until we were put into a lower-end housing or government
housing and welfare.
And from ages eight to 14, we moved four times and finally we moved into the project.
Two years before that, my mother was diagnosed with multiple sclerosis and age 18, she died.
And I gave this story and I said, and I want to talk to people about stability and how
important homeownership is.
And I will never forget the first guy he had his mouth open and he looked at me after
I gave my pitch and he said, You know, that's a really good story.
I want to hear more about it.
And I just could not believe the transformation that it happened when I told my story.
And the reason that I'm bringing that up today is that your program is so impactful.
I mean, it changes people's lives.
And one of the things that I found out that changes my life and changes other people's
life is when we tell our story.
Oftentimes we think that our story is not that important.
But I have learned it and every since that event happened, I've been telling my story
and in fact I changed the entire way I wrote my book, I put it in a story form of people
who didn't think that they could qualify, but they did.
And so that really is where my background is.
And it's a background of wanting greater stability and wanting to transform lives through homeownership.
Nicely stated.
Do you care to take us through like the ABCs, the 123s?
I know a lot of people are misinformed about actually obtaining the mortgage or executing
homeownership or believing that they can have homeownership.
That's right.
That's what I've been taking this interview and I just think that it can be a very powerful,
positively impactful to the masses.
Oh, you're back.
Yeah.
Yeah, I can do that.
It really starts with being, you know, on a deeper level, what I did was when I read
when I finished writing my book, it was about 2 a.m. in the morning and I said, okay, I'm
done.
Now I'm going to read it.
So I started reading the book and it was the worst book that I've ever read on mortgage
financing.
I mean, it was horrible.
And I thought, no, nobody's going to want to buy this book.
Why would I ever want to put this book to anybody?
Because I don't even think it's very good.
And so I put it on the shelf for a while and I said, you know, I got to really think
about it.
And so what happened is, is kind of a transformation came about that said, what is homeownership
really about?
What are the deeper issues of homeownership?
And so I came up with the idea that came to me with the idea that homeownership is a
sacred trust.
And not necessarily in a religious text, but in a spiritual deep sense that says, wait
a minute, this is something special.
This is something that if I take care of it, it will take care of me.
And then I really began to see that by looking at all of my clients and everybody that I've
done because I've done about a billion dollars in the originations over the years.
And I discovered the most important thing is that transforming lives through homeownership,
it's a transformational process.
And when we talk about the A, Bs and Cs of mortgages, I like to bring in something before
that that basically says, if you shroud that in something special, you're shrouding that
in a transformation process because you've got to be grounded.
In other words, why is it that you want to own a home?
And so the why is really the most important to me.
It's interesting that the financial aspects are great.
The average or the median net wealth of a renter in the United States today is $5,000.
And the median net wealth of a homeowner is $230,000.
So it's a 46 times difference.
So you begin to get the idea, well, the financial aspects are really important.
But then you think to yourself, well, what other aspects are there?
And those aspects, it's interesting.
Study was done that showed that homeowners have a 50% less chance of divorce than those
people who rent.
Homeowners have lower incidences of their children getting asthma.
And generally speaking, children who grow up in homes do better in school.
And there's all of these things that go that are what I call the underbelly of the things
that are the driving force behind wanting to do that.
Nicely stated.
So you actually used to do mortgages, are you like a riddle or how is that working?
Well, that's a great question.
Yes, I still do mortgages.
I own a company called Main Street, Morgan Chair in Southern California.
And I've been doing this for 30 years, or 30 years plus.
And this whole movement that I have, that I'm putting together is igniting what I want
to do is ignite a home buying revolution.
Among millennials, among people of color, I want to be able to ignite a revolution where
people say, wait a minute, home ownership is something that is sacred and that is special.
I think that there was a big disconnect from the subprime crisis that happened.
And I think that people got really into their heads about, well, maybe home ownership isn't
so great after all.
I mean, there are 9 million people that lost their homes.
And that's not even counting the ripple effect of all the millions of people that were affected
by that horrible time period.
And so today, it's the highest point in 50 years that people are renting.
There's more people renting today than there have been in the last 50 years.
And so what I did is I began to look at that and begin to say, wait a minute, this is not
right.
Home ownership is the foundation of a really strong financial and peaceful and stable existence.
Why is it that people are renting, more people are renting when actually there are more programs
available today to be able to buy a home than there ever have been in the past?
If you take away the subprime crisis, which was ridiculous and irresponsible underwriting,
today the ability to get financing is probably, I wouldn't say easier, but it's available
to more people than it ever has before when you take into account low interest rates,
when you take into account that now they allow for a 100% gift on all of the loans.
It used to be just FHA.
You could have a 100% gift, but now on conventional financing, on regular conventional financing,
you can put down as little as 3% and it can all be a gift.
And that's one of the big myths out there right now is that you've got to have 20% down.
There was a survey done by Fannie Mae that showed that they did a survey with people
that were renting and the results were is that 45% of the respondents who were renters
believe that you had to have 20% down.
Well, if you're going to buy a $300,000 home or $400,000 home, that means you've got
to have $60, $80,000 for down payment.
Immediately, that's going to shut me down.
I'm going to say no way.
I can't do it.
But the facts are is that I only need 3%.
So if I want to buy a $300,000 home, all I need is $9,000.
Does the credit impact on that?
I would like for you to touch on that and to give that away that you're going.
Yeah, that's a great question.
And the credit is really a foundational aspect of home ownership and getting along.
Now the myth is that you've got to have a high credit score.
The reality is is that no, you don't.
You can have a score down to 620.
There's some FHA financing as low as 580 for credit score.
Now a credit score just to kind of give you an idea with your listeners here is a credit
score is an algorithm that includes things like how long you've had your credit, whether
or not you pay your bills on time, what your balances are in proportion to what your available
balances are.
So if you've got a credit card that has an available balance of $5,000 and you owe $4,000,
well that is going to impact your score in a negative way.
And so it's an algorithm that's put together.
It's kind of a black box, you might say.
And so we pull your credit and when your credit is pulled, we get the score.
It spits out the score.
And the score is all of the details about how and your intention about your credit and
whether or not you pay your bills on time.
And so that you get a score.
And that score pretty much says, okay, you know, between certain scores, my rates will
be a certain rate.
So it's all what's called referred to in the industry as risk-based pricing.
And so if your score is a high score like in the 700s, then your rate will be better
than if your score was a 680 or a 640.
There is one aspect about credit that is beautiful that most people really shy away
from.
And that is, is that you can fix your credit.
You can make it better.
You can do things with it to improve your score.
And I've had people in my office where I looked at their credit, they came back and their
score was 580.
I mean, some as low as 460.
And so we would just go through it line by line.
We'll get out the credit report and say, well, what happened here?
And what do we need here?
And there have been times when we call the collection agency right then and there, right
in my office and say, can you delete this?
And in many cases, we'll say, yeah, if you pay it today, this charge account, then we'll
delete it.
And it can take up to a year.
It can take a little while, sometimes six months to a year.
But generally speaking, you can make it better.
So your score is an important component of financing.
That's part of the strategy of planning.
So when you talk about the idea of, of Lee, of wanting to know the ABCs, the most important
thing in the sprint and being able to get your home purchased is to put together a strategy.
That's where people come up short.
That's where they fail is they don't put together a strategy.
And that's sort of good mortgage profession will help you do is outline that.
Look at your credit.
Look at all the details that you'll need to look at and actually go through a plan of
what you need to do.
Nicely, I know that probably a lot of the audience are, you know, probably challenged
around, you know, financial literacy and the credit portion of it.
Would you care to talk more about, let's just take the average score of 580 and explain
to us what goes into being able to get someone approved for a home, get their scores in that
580 to 600 range?
Okay, that's a great question.
So basically, if you have a 580, you're limited to what you can get as far as the loan goes.
It's only going to be FHA financing.
And there are a lot of lenders that won't even lend to you at 580.
Now there are a lot of, there are some FHA lenders that will, but most of them do not.
And so we have clients that we've gotten financing that low, but it's very limited and the rate
is high.
So for instance, today on a loan that might be 580, your rate might be 3.875% or something
like that.
Well, if you can get your score to 620 to 640, then your rate would be something like 3%.
And if you get it up to a little bit higher, then your rate could be as low as 2.5%.
So it really depends on where you want to be.
So if you come to me and say, you know, I really want to buy now, and I'm prepared to
buy now, but my credit score is lacking, then we will try to get you financing based on
your credit score.
But again, your rate is not going to be as good as if you were to put a little bit of
plan and thought and strategy into it and say, well, maybe what I can do is get my credit
better.
And we work with people on that.
I mean, a good mortgage professional will sit down with you and will say, you know, these
are the things that need to be corrected on your credit.
You need to pay off this collection or you need to ask the agency to have it expunged
or what's called deleted as if it was never there before.
And then your score is really begin to go up.
If you pay off debt, then you have the capability of saying, okay, we're going to be your score
will continue to rise as well.
What if you have someone that has like a lot of credit card debt and they can't just pay
it off, but they have a decent score like 620 or 640?
Can they still get a home or?
Yes, most definitely.
As long as they have the income to qualify, the key is being able to have income because
unlike the subprime crisis, now you have to have an actual pay stub and you have to be
able to have a job and show a continuity of income over a period of time.
And that if you have that and the income is great enough, then you can definitely qualify.
Now you bring up a very good question there because the question is, should I pay off
all my debts and then buy a home or should I buy a home even though I have these debts?
And that is a really personal question.
If you have the income to qualify and you can responsibly buy a home with your existing
debt, my opinion is to buy the home.
The reason that I say that is is that generally speaking, home prices rise and if you wait
too long, you could be priced out of the market because of rising prices.
Now that doesn't mean that you want to go out and chase a home and get a home right
away.
You need to responsibly buy a home strategically the way that it's going to be best for you.
People, my experience is that people who own homes and it's a literal fact that people
own homes tend to save more money than people that rent.
It's weird because normally your mortgage payment is going to be higher than your rent
payment and people say, well, just invest the difference, rent and invest the difference.
But it generally doesn't happen.
Studies show that people don't save money.
Right.
Yeah, because only a limited percentage actually know how to be good stewards and actually
manage the money and allocate the money to the proper spaces.
Right.
So let's do a scenario where maybe you have a 30 year old couple and they're working
jobs with the median income and let's say they want to purchase a home.
I know California prices are probably higher, but let's just say they want to purchase a
$200,000 home.
How would you guys think of that step by step?
They don't know anything about the profit.
Right.
Okay.
So the first step is to say let's check your credit because that's where it all starts.
And then at that point, then we say, okay, after I have a credit score and after I have
a sense of what your income is.
So what I do is it's called the three C's, which is credit, collateral and capability.
So the first thing we check is credit.
That's the number one priority.
We check the credit first.
And by doing that, we get an essence of what the score is like.
And then we can decide, okay, can we move forward or not?
In other words, if there's some serious issues going on on credit, then we really need to
begin the process of fixing the credit before we really do anything else.
And then the next step is as we look at the collateral, what is it?
How much do you want to buy in the area?
What you're talking about is a $200,000 home.
Well, that means that they're going to need to come up with, if it's a 3% down payment,
they're going to need to come up with $6,000 for the down payment and plus closing costs.
Now when you put down 3%, you've got to go to counseling and have a counseling certificate
that Danny May and Freddie Mac, those are the people that offer these loans through brokers
and lenders.
And you go through and it's kind of a training module that they will take you through.
But before that even happens, we feel, okay, your credit score.
So let's say that we have a score of 620.
And let's say that the rate is 3.5%.
And let's say that we're going to do basically a home.
The appraised value is going to be $200,000.
And we're going to put down 3%.
So the loan amount is going to be $194,000.
And let's just pretend that we'll do what's referred to as conventional financing where
we don't have to go the FHA round.
And as a result of that, and let's say that the rate is going to be 3.5%.
Well based on that, your payment is $871.
Now by the time you put in the taxes and the insurance, then your total payment, let's
say it's a condo that you're going to buy, your payment now is about $1,546.
And then you simply say, okay, if it's $1,546 and I'm making $4,000 a month, well on that
basis you would qualify.
And that is the third C, which is capability where we say, okay, what is your income compared
to what your housing expense will be, including your credit card debt, which could include
student loans, credit cards, or car payments.
And so the less debt that you have, the less other debt you have, the more home you'll
qualify for.
Got it.
So did I explain that okay?
Oh yeah, perfectly.
Okay.
Very fairly.
Actually I have two questions.
One question is, what does the percentage have to be, is it based off of the growth income
or is it based off of net income?
Oh, great question.
Right, so that's a key and again, that's a myth.
It's a myth that people don't have enough income to qualify.
In fact, I get people who call me all the time.
And the first words out of their mouth.
It's really funny.
The first words out of their mouth is always, I know we probably can't qualify, but we saw
this home over the weekend and we want to see whether or not we can buy it.
And you know, and nine times out of ten within 20 to 25 minutes after we pulled the credit,
looked at everything, looked at their pay stubs, they qualified to buy.
And they're in a house within 60 to 90 days.
So this idea of not knowing what you don't know, it's really important to get that answer.
And so the key really is to find out and put your income down there.
So it's gross income.
And they don't go off net because people might have deductions or things like that.
They go strictly off of your gross.
And so if you have two borrowers on the loan, they're going to combine that.
They're going to pull credit.
And the credit score they use is going to be the middle of the lower score of the other
person.
So if there's two people, we pull two credit reports.
They both get three scores.
So the lender will choose the lower of the middle scores of the two clients.
And then we simply say, well, what is your income?
Let's say that they have total debt of $2,000 a month and they earn $48,000 a year.
Well that's considered, and you can read more about this in my book, it's considered a 50%
debt to income ratio.
So that means 50 cents out of every dollar that you earn, gross that you earn, will go
towards your house payment and your debts.
Now generally speaking, you want to keep that, I mean in California it tends to be
higher.
It tends to be anywhere between 43% and sometimes 50%.
In fact, FHA will allow you to go up to 56%.
But you've got to remember that sometimes it's easier to qualify for more house than you can
actually afford.
And so that's when you have to go down with your strategy, with your budget, say, what
can we actually afford on a monthly basis?
Just gross income of course is not the income that you receive, it's the net after your
deductions.
Yes.
So the median qualification you're saying is basically they want likely to be around 43%.
Yeah, 43% to 45% will generally get it done for you.
If it's FHA financing, then they will go up sometimes as high as 56%.
And some people would call that irresponsible lending.
I don't call it irresponsible lending because a lot of times people have income sources
that we can't use as qualifying parameters for a loan.
Say somebody has just started driving Uber or Lyft part-time and they've been doing it
six months and they've been receiving an extra $1,500 a month.
Well, I can't really use that as a second job because I need a two-year track record
for that.
But you know that the income's there.
And so it's quite possible that you can buy the home.
That's why the strategy is so important of sitting down and saying, okay, this is our
credit, this is our income.
What is it that I can actually afford and how much money do I have or that I can get
for a down payment?
Right.
Nicely stated.
Would you care to explain the process like with the title company and the what closing
cost and like the feedies?
I think that was good inside this year.
Yeah, yeah, that's a great question.
So when you buy your home, let's say that you find the home that you want and the offer
is accepted by the seller, then you go into what's called escrow or contract.
In some areas of the country, it's called under contract.
In other areas, it's called escrow.
When it's under contract, it's usually an attorney that will take care of it for you,
that will represent you as the buyer.
When it's an escrow, it's an escrow company that will represent you.
The escrow company is considered an uninterested third party that basically brings, it's like
a spoke of a will where the middle spoke is the escrow company and then they bring in
the buyer and the seller and the inspection company and the lender and they just kind
of help coordinate and orchestrate the deal.
And your closing attorney will do the same thing.
But that your closing attorney will work with another attorney, which is going to be
your list in attorney.
And the first thing that happens when you have your home in escrow or under contract is you
will pull the title report on the home that you're going to buy.
And the title report shows what's called the chain of title.
That means from the very time that the house was built to the present, which could be five
years, it could be 60 years, there's a chain of title that everybody who has owned that
home is on that report.
Their names, how much they paid for the home, they go back to the very first, even when
it was just raw land.
And then at that point, what title insurance does is the title will pull that and the lender
requires that you have to have title insurance.
And title insurance is to indemnify and protect the lender against any liens or judgments
that may come up at a later point.
So if the title insurance show it's clean, then the title insurance company says, okay,
we're clean on this, we will provide a policy.
So you as the homeowner buys a policy, which is part of the closing cost, and that policy
will protect the lender and it will protect you because there's also what's called the
homeowners and title insurance that will protect you so that in the event that the
title company missed something and they said, oh, there's a lien on it, there's a mechanic's
lane, somebody has claimed to the house, they will be responsible for pain, whatever
fees may come up at a later time.
Okay.
And so can you share ways that people are able to get like down payment assistance?
Because I've heard of a lot of people like kind of like what you said when they call
and they're kind of like more negative or doubtful before they even find out ways that
they are able to come up with the down payment.
And a lot of people from what I've heard about are usually not in the mindset of saving.
And I know that's part of the counseling deal, but are there down payment assistance programs?
Yes, in some areas, in some cities and municipalities, there are down payment assistance programs
where you don't have to come with any money.
The down payment would be in the form of a second, what's called the silent second.
You basically don't pay on it all until such time as you sell your home.
There's other ones where you pay an interest only payment.
There are some that are grant where the money is actually given to you.
There are a lot of different ones.
And so it's really important that whatever city that you live in, that you call and you
find out whether or not they have any kind of down payment assistance programs.
Now the interesting thing about it is that when you use down payment assistance, it kind
of narrows the field of the lenders that you can choose or the products that you can get.
Usually it's relegated to FHA financing, which is okay, that's a great start.
Sometimes it's better just to come up with the down payment on your own.
And coming up with the down payment on your own, at first seems really insurmountable,
even if it's $9,000.
And yet that is where after the transforming lives through homeownership, Lee is really
the essence of buy versus rent.
Then you get to the next step, which is the drive to buy.
And when you get to the drive to buy, that's when you basically say, wait a minute now,
how am I going to do this?
It's like, now I know that I want to buy, but how am I going to put it all together?
And that's where the drive to buy comes in.
And a story is I had a couple that came in, they sat down at my desk and we looked over
their credit, we looked over their income.
And I basically said, no, now is not the time.
You're not going to be able to qualify at this point.
You need to improve your credit.
You need to increase your credit score, of course, which is part of improving your credit.
You need to increase your income and we have to have a down payment.
And so a year later, they came back to me, they gave me all their documents and they
said, can we qualify now?
And I remember looking up at them and saying, yes, you can qualify.
What did you do during that year?
Because I gave them very specific things of what they needed to do.
Well, they pulled the trailer onto the backyard of their parents' home and they lived in
the trailer for a year to save money.
They asked for raises.
They got new jobs.
They paid off debt.
They had derogatory items removed from their credit report and now they were ready to go.
So the drive to buy is really powerful.
And so when you talk about this idea of the down payment, it's kind of like an example
would be, let's say that we have a young mother that has a three-year-old child.
And I were to take that child and put a gun to the head of the child and say, come up
with $10,000 or I'm pulling the trigger.
Well, you can bet that this person, that this mother is going to come up with a $10,000.
No question about it.
And by the way, you never want to do that with a mother that's got a teenage.
Sometimes we'll say pull the trigger.
But with the younger children, it's usually, hey, no, we've got to make this happen.
So they come up with the money.
And that's why when I talk to people and I say, what's your biggest obstacle of buying
your home?
And they say it's the down payment.
And that's why I say really, well, let's talk about that.
Can I help you with that a little bit?
Because when you really dig down deep to it, what is really holding you back?
It's not the down payment.
It's something else usually that's in the way on a deeper level.
And maybe it's because they're saying, you know what, I need to go back and get my GED.
Or I need to go back and I need to go to school or a trade school.
Or I need to clean up my credit.
There's something that's deeper.
It's never I don't have the money because I know that people can come up with the money.
And so it's the idea of looking just a little bit deeper and saying, well, what is it that
I need to make some changes to be able to come up with that down payment?
Maybe I need to go to my parents and ask for a gift.
Or maybe I need to move in with my parents for a little while so I can say for the down
payment.
There's always things that go along with that.
Right.
Wow.
Can you tell me like, so do you loan in all 50 states or the only loan in California?
Well, right now, yeah.
I am a mortgage professional broker that is licensed only in California.
However, we have sources across the United States where if you live in other states,
other than California, which I'm sure most of your listeners probably will, we can get
them referrals and get them set up with the right people.
And or they can go to a real estate professional in their area, a real estate agent and ask
who they use that would be really good.
Now, your question is a really good one because the market is very hot right now.
It's very busy.
There's a lot of business going on and there are loan officers and mortgage professionals
that will not take the time to work with a first-time home buyer.
But there are a lot that will and you need to make sure that you find somebody that will
take that time.
That's really critical.
That's one of the pillars of our company is that we will take the time, whether it's
a $50,000 loan or whether it's a million dollar loan, we'll take the same amount of
time as what it takes.
And so you want to work with a mortgage professional that will give you that time.
Nicely stated.
Do you know much about people that like fix up homes like hard money?
Did you share with us a little bit about that?
Yeah, I know.
Are you asking?
Yeah.
So is it from somebody who wants to buy it and fix it and then flip it and sell it to
somebody else or do they want to buy something they want to buy and then fix it up and live
in it?
Like fix it.
So they're going to want to live in it, right?
So base on that.
What's that?
Like resell it.
Resell it.
Okay.
So it was going to be a fix and flip.
That's a little bit different.
That's where you would actually take the money or you would find a property that's in
need of a lot of repair.
And then you would find a lender who would loan on it.
Now normally conventional lenders won't loan on it if it doesn't have a toilet, if the
cabinets are out, if it doesn't have a working stove or utilities, if there's no flooring.
I mean if it's a really home that's really run down and needs a lot of work, then you
have to go with called hard money or what's called the non QM route.
And that's where you, at that point you need to put down a lot of money.
You need to put down maybe 25 to 50 percent depending on your qualifications.
You buy the home, you put the money in it to fix it up and a lot of times there's family
members and investors that will want to work with you to do that.
And then you sell the home after it's fixed up.
Hopefully it's a much better profit.
Nicely.
So how would it work on the opposite end if a person found a home, I guess, it needs quite
a bit of work and they want to fix it up and have it as a start at home.
They want to live in it.
That is, the reason why I love that question is that there are a bunch of programs that
are available today that most people don't even know about.
So the first thing is, is when you look at the home and you say, yeah, this is the
home I want, it's got good bones to it, it's what we call it in the industry.
We just need to be able to fabricate it and make it better.
The first thing you ask yourself is, will it pass a conventional smell test?
In other words, will it make it so that I can go FHA or conventional financing?
Because it may have carpet, but the carpet's really old or it may have stains on it.
The cabinets, they're workable, but they may not look that great.
Well, chances are pretty good that you'll be able to get normal traditional financing
either through FHA or through conventional financing.
Now here's the cool part is that if you don't, you can still get conventional or FHA financing
and it's called lifestyle.
If it's a conventional financing or home style is what they call it.
Or you can do in FHA terms, what's called an FHA 203K.
There's actually loans available to where you buy the home, let's say you buy the home
for $300,000 and it's going to take $50,000 to fix it up.
Well you buy the home for $300, but the lender appraises the home as if all the work has
already been done, which is $350,000.
Then you get bids and the lender helps you put all this together.
You get bids and a contractor.
They put in all the upgrades and the houses worth $350,000 and you move in.
So when you buy the home, you actually buy it based on the improved value, which is $350,000
in this case.
So there are some great programs and again, that's why it's essential to ask lots of questions
and to find lenders who will go the extra mile to be able to help you find a home and
get the financing.
Wow, you have in-depth knowledge.
I wouldn't, I would like to ask a few questions to continue because you seem to have a strong
knowledge base.
Talk to us about like probate and like bank REOs or pre-for-for-for-for-for-for-for.
Yeah.
That's a part that I usually, if you're going to buy a home and you're not really familiar
with that part of the real estate game, you might say, I generally recommend to stay away
from that.
When you buy something that's at foreclosure, in other words, you buy it on the steps of
the courthouse, in most cases you're going to be competing with people who want to pay
cash for it.
And so you've got to be able to come up with a cashier's check for a home that you've
viewed that in many times cases you haven't even been inside of it.
You know, you've walked it, you've looked through the windows and you see that, yeah,
this is something that I want to buy and I'd like to live in it.
It's just really important to understand that when you buy it out of foreclosure, you're
going to buy any of the existing liens or any of the taxes that are owed on the property
at the time.
So they're generally speaking, when you get into probate and pre-foreclosure, there's
taxes that are owed on the property that haven't been paid for anywhere from two to
three years in some cases.
And you're going to be responsible for bringing all that up.
So it's really important that you check the deed, that you check the title work, that
you find out if there's any liens or encumbrances against the property.
So that's kind of an area that, you know, it's kind of a cool thing to look at.
If you can find some kind of a pre-foreclosure that's listed by a real estate professional
before it actually goes to foreclosure, then you have a little bit better, then that's
where you want to be.
You want to be represented by a real estate professional as much as you can.
You really don't want to go up and do it on your own.
If you try to do it on your own, my belief is you're shooting yourself in the foot.
So you want to go out to a pre-foreclosure that's still listed with a real tour?
Yeah, yeah.
You know, a good real estate professional is worth their weight in gold.
When you get somebody who knows the business and knows the geography of where you want
to buy, you can't beat it.
They are just, they will make the difference between a great experience and a really bad
experience.
Okay.
Okay.
So your book, is it an audible form?
Is it an e-book or is this physical book?
Yes.
What's in the interbook?
The book is, buy your first home today.
You can go to Amazon and get it, or you can go to my website, my page, my landing page,
which is johnwmallet.com.
That's JOHNWMALLETT.com.
And you can actually upload the first chapter free of charge.
And any questions that your listeners have, call me.
I'll be more than happy to work with them.
All my contact information is on that landing page.
And anything I can do to help your listeners, I would be more than happy to help as much
as possible.
So people, and if it's out of the state, then we'll refer them to somebody that can
help them.
And I want to make sure that I understand correctly, you have your own mortgage company.
Yes.
And you've been doing mortgages for 30 years.
Yes.
Were you ever like a real estate agent or just only been on the mortgage side?
No, I've always been on the finance side.
I like the numbers.
I like the idea of the finance because that's what's really critical in order for people
to buy their home.
Right.
Did you talk to us a little bit about points and how that works?
Mm-hmm.
Yes.
So what you're referring to here is your closing cost.
And when you buy a home, you're always going to have closing costs.
You'll have appraisal fees, you'll have underwriting fees, you'll have the title,
you'll have your attorney or the escrow fee, whichever state that you're in.
So you'll have some fees.
And then you'll also have what's called impounds.
Impounds are where when you pay your mortgage payment, you also pay your taxes and your
insurance.
So they'll want to get maybe six months worth of taxes up front.
So it's really important to get that outlined on what your fees will be.
Now when you talk about points, points are used to buy your rate down.
So it's really important to know that there's no free lunch.
You're either going to pay for it up front or you're going to pay for it at the end or
during the time that you have your loan.
There's no lender out there that's going to give you anything that's going to be free.
So if you have a rate, let's say the rate is at 3% and what we call it par, that means
at 3% there's no points.
Well if you go to 2.875 or 2.75, let's say 2.75, it might cost you 1 point, which is 1%
of the loan amount.
So if the loan amount is $200,000, that means that that will cost you $2,000.
So it's going to cost you $2,000 up front to get the lower payment, which gives you a
lower rate.
And that gives you in turn a lower payment.
So at 3%, the payment may be $1,000.
At 2.75, the payment may be $960.
So it may be a $40 difference.
And then you have to decide, well is it worth it for me to pay points?
Do I break even soon enough to be able to make that up that money?
And you also have to say, do I have the extra money?
Because usually when you're buying your first home, you're down payment, scraping your down
payment funds together is about all you can do sometimes.
So you want to really have it set out to what your points will be.
I generally believe it's better not to pay points because I think that first time home
buyers tend to refinance their home within the next five to six years of owning the property,
you know, whether to get a lower rate or to get a better loan, whatever it might be.
And so I generally say don't pay points.
In fact, in some cases, you can actually increase your rate.
When you increase the rate, the lender will give you a credit that will go towards your
closing cost.
So that's where your mortgage professional can explain the different options to you.
I have a client right now that they're just going into escrow that bought a property.
All they have is their down payment.
They have no closing costs, funds available.
So they're going to get a rate that's high enough.
They will offset all of their closing costs.
And that will be a credit that's paid by their lender.
It gets a little bit confusing.
It's something that takes a little bit of work to understand it.
But there are a lot of different options that you can take.
One more thing I would like for you to explain.
Explain the pros and cons to having, or do you have a choice with like the taxes, like
where you pay monthly or can you pay it all at the end of the year?
Because I'm originally from Oklahoma and I know my mom used to pay it, I guess, at the
beginning of the next year.
I won't ever do, but it's like it's due several months later.
Yeah.
Talk to us about that.
Oh, you bet.
So taxes, you either pay it with your mortgage payment or you pay it on your own.
Now in order to pay it on your own, in most cases you've got to put down at least a little
bit more than 10%.
So you've got to put down like 10.1%.
In other words, you've got to have a loan that we call it 89.9% loan to value.
It's the amount of money that you're putting down versus what the cost the property is.
And if you can put down a little bit more than 10% then you have your choice of whether
or not you want your payments to be, your tax payments and your insurance payments to
be what's called impounded or in an escrow account so that when you make the payment,
you automatically pay your taxes, your insurance.
Anytime you put down less than 10%, it's mandatory that you have to have that.
If you put more than 10% down, it's slightly more.
Then you have a choice as to whether or not you want to pay it yearly in some states since
every year and some states like California, it's twice a year.
So it's every six months.
Oh, okay.
So you do, yeah.
Tell us about PMI.
PMI.
Okay.
Oh, that's a great question.
PMI is called, it stands for private mortgage insurance.
We just call it MI in the industry.
And mortgage insurance is an insurance policy that's taken out by a third party or by the
lender that will ensure against default.
So let's say that studies are done that show that when people put down 20%, the foreclosure
rate is like 3%, or 2%.
I mean, it's like nothing, right?
When you put down a lot of money, lenders feel very comfortable with the fact that this
person's not going to walk away from the house.
And so that's where you get a little bit better pricing and that's where you have no
mortgage insurance.
And lenders back in the day were very hesitant to put down less than 20%.
They wanted only people that had 20% down.
Well, that became really difficult for people to be able to do that.
So then these entrepreneurs came up and said, well, wait a minute, I think that this client
is going to be able to make their payments and that they're not going to foreclose because
we've looked at their income and credit.
They look great.
So we're going to take out an insurance policy and we're going to give it to the bank and
we're going to tell the bank to say, listen, we'll make up the difference with mortgage
insurance, we'll give you an insurance policy that basically says, if these people foreclose,
we're going to tell you the difference as if you had a 20% down to begin with.
So that means that they would make good.
If somebody puts down 5%, that means that this insurance policy would give the bank 15%.
So they would cover the bank in case of a loss.
And the biggest misnomer and I talk about this in my book is that people say, no, I
don't want to pay mortgage insurance.
I want to wait until I have 20% down.
And I show in my book and I talk about the opportunity cost of waiting and it's not a
good idea.
In the example I give, it costs the person who decided to brother A and brother B, brother
B decided to wait and not pay that extra mortgage insurance payment because every month
you're going to have a payment of mortgage insurance that might be anywhere from $50
to $300 depending on what your mortgage is and what your down payment is.
And they say, no, we don't want to pay that.
Well, what that allows you to do is get into the home now so that you can get in on the
values that over time increase.
And sooner or later your mortgage insurance goes away versus waiting, which is an opportunity
cost in my book, the opportunity cost was like $130,000 over a five year period that
this person had to wait five years before they get a mass 20% down.
By the time he could, he had to have more money because prices went up.
That's not always a say that prices will rise.
Mortgage insurance is one of the best things that you can take advantage of because it
allows you to have a smaller down payment.
Oh, okay.
Okay.
Wow.
Well, it's been a very, very powerful impactful show and I'm sure there's someone in the
audience that finds great value of this and will move on this information and hopefully
reach out to you.
Before we close or in closing, please go over your social media and how the audience can
contact you if they have any questions or like to grab the board.
Oh, sure.
You bet.
The best one goes to john wmallet.com and that will give you a good start and give you
contact information.
You can also go to mainstreetloans.com, which is our website.
But just contact me and give me an email.
I'll have one of my team members call your listeners and we'll help them and we'll do
everything we can.
It's a home ownership is one of the greatest opportunities that we have to really find
the stability in life that we want.
Wow.
I think it's been amazing.
I think it's been a great show.
You've been live on the sudden impact show with Joe host Lee and coach john w mallet mortgage
industry expert.
I'm going to leave you with a few quotes.
I like to say thought is the highest function that a man or woman is capable of.
Buddha said it this way.
All that we are is some total by thought.
Ralph and Ralph Waldo Emerson said it this way and man is what he thinks about all day
long and then Solomon said as a man think it in his heart.
So is he then he before said it this way whether you think you can or you think you
cannot either way you're right.
So everything lies.
Start with your thinking.
So we had a very special guest today a mortgage lending expert.
He's kind of told you the ABCs and 123s of how to begin to pursue homeownership and
he added a additional part that drive to buy.
So I think important content was dropped a lot of gems and most of the truth for drop.
Please take advantage of this.
And we'll no further do until the next time to either use your face.
Thank you john.
You're welcome.