Tulsa Mortgage : Podcast 26 – Part 1
Tulsa Mortgage Speaker 1: This is stevecurrington.com, episode number 26 of the Steven Tyler Show.
Speaker 2: Welcome to the Steven Tyler Show with stevecurrington.com and Tyler Web.
Steve: Who negotiated the contract for you?
Tyler: A realtor.
Steve: You’re very smart.
Steve: Good for you man.
Speaker 2: They’re talking about everything you need to know about mortgages, home loans and more. Nobody knows mortgages like these two. Get ready, because here is Steve and Tyler.
Tulsa Mortgage Steve: Yes, what’s up, Tyler?
Steve: We’ll be talking — Wait a minute. Where do we do home loans?
Tyler: We do home loans in Tulsa.
Steve: In MLS 1043976. I want to be the guy that does the real fast with a perfect cut on 1043976, stock number 107208.
Steve: 107208 is an account number [laughs] for one of my accounts. Because I don’t know I remembered that stock number 107208.
Steve: Tulsa mortgage.
Tyler: Tulsa mortgage, Columbia mortgage, Alamosa home mortgage, Farmington mortgage, Colorado Springs mortgage. Should I tell you more?
Steve: I think so.
Tyler: I think I hit.
Steve: I think you’re pretty close, bro.
Tyler: I got it.
Steve: So, what are we talking about today then buddy?
Tyler: It’s about mortgage insurance.
Steve: Mortgage insurance is bad.
Steve: Yes. People are always mad about mortgage insurance saying, “I don’t want to pay mortgage insurance.”
Tyler: But, you don’t have to [laughs].
Steve: You’re right. That’s a good response. You hate mortgage. Well, but what I’m telling people is life if they are so opposed, I’d shut it for 20% down. I’m so opposed to the mortgage insurance. My mic-
Tyler: Turn it up.
Steve: What are you going to do? Are you going to put 20% down? Because, we talked about this on the last podcast. What’s great about having cash?
Tyler: I’m having it.
Steven: Having cash. So, how many times do we do a loan for somebody they put a whole bunch of money down? They’re like, “Look at me, I’m so cool. I’m not paying mortgage insurance. Hahaha, look at how much money I have. I’m so rich. Look at blah, blah, blah.” And then what happens? In 65 days, “Hey Currington, do you do home equity loans?”
Steve: And I’m like, “I told you. You didn’t have to put all that money down.”
Steve: Hi Burke Park and Chelsea Ward. How is it going? So, look, I’m making fun but I’m not. If you want to put a bunch of money down, plan a little bit. If you’re going to do some repairs to the house or you’re going to do maybe some remodeling, you might want to set some cash back and figure that out so you might — But, that’s a whole another Tyler. What is mortgage? Does the book say what mortgage insurance is? Could we get like — Do we have like a thing?
Tyler: No, not really.
Steve: There’s no definition of it.
Steve: Let’s go to Google. If you’re out there listening in podcast world, go to Google and type in, “What is mortgage insurance?” Was that my good radio voice, bro?
Tyler: Yes. I like it.
Steve: What is mortgage insurance? Well I’ll tell you what it is. Here we go, okay. For most home buyers the biggest hurdle to owning a home is the down payment. Private mortgage insurance otherwise known as PMI, which is different than government mortgage insurance which is, this is going to blow your mind. It’s called MIP.
Tulsa Mortgage Steve: They’ve just changed the letter. So, mortgage insurance premium. Hey Chelsea, you’re trying to learn some. You’ve already got your house. You’ve already got the word, girl. Mortgage insurance premium for FHA, private mortgage insurance for conventional can allow — okay, so private mortgage insurance or private MI can allow you to purchase a home with less down than what otherwise may be required.
Lenders and investors typically require mortgage insurance for loans with down payments of less than 20%. Some mortgage insurance companies provide lenders a financial guarantee should — well, all of them do — should a loan go into foreclosure. So, it is this guarantee that allows many lenders not to require 20% down payment when making home loans.
So, when you’re paying it that’s what’s happening. You’re paying it, because we are ensuring the fact that you’re going to make your payments. And if you don’t, that mortgage insurance company will come in and they will help us out with the problem. So, here’s how it works according to Google. So, go Google it. People ask me questions all the time which I love, because I’m like the mortgage Google. A little shaky.
Tyler: Take it back. Take it back.
Steve: That just happened.
Tulsa Mortgage Steve: Tyler, you need to take your little podcast while I go to GoDaddy real quick. So, I’m the mortgage Google.
Tyler: I like it.
Steve: That’s pretty good. All right, so talking about mortgage insurance, how it generally works. A borrower who’s buying a 150,000 home and makes a 10% or 15,000 down payment, the lender that obtains private mortgage insurance for the 135,000 mortgage reducing exposure to loss from 135,000 to 101,250. That’s how it works. So, now, my loss is less. That’s why we require that.
The private mortgage insurance covers the top portion of the mortgage, usually the top 25% to 30%. In this case, the mortgage insurance will absorb 25% or $33,750 of any ultimate loss to the lender. That’s why we get mortgage insurance, because this is going to blow your freaking mind. But people don’t pay.
Tulsa Mortgage Steve: Tyler, why can’t you approve me? I have a 580 score and it says you’re now getting to 580. Dude, come on. You’re not going to pay. I love you, but you don’t pay anything. That’s why your credit score is so low. But, in all seriousness, sometimes you don’t pay for the mortgage and that’s why you have the mortgage insurance. But, Tyler is mortgage insurance bad?
Tyler: No. It’s not bad. It’s really not.
Steve: It’s not like-
Tyler: Thanks to mortgage insurance people that don’t have 20% down can buy houses.
Steve: Right. And, so, let’s say I’m buying a $100,000 house and I have 20,000 bucks in the bank. Should I put 20% down, because that would be 20% if I have 20,000 in the bank or should that be 20% down?
Tyler: If you absolutely want to. Sure, why not. But, you don’t need to.
Steve: You don’t need to?
Steve: So, like I said a minute ago, you just might put all that money down and then need some cash within six months of moving into your house or three months or whatever. And then, you’re going to be tall-structure word. Because most likely you’re not going to get home equity loan that quick. So, I am currently on GoDaddy. Because, in case anybody doesn’t know stevecurrington.com is a domain buyer.
In fact, I am on their list. GoDaddy calls me and they’re like, “Are you okay, Mr. Currington? I’m like, “Yes, I’m fine. Well, we noticed you haven’t bought any domain this week.” I’m like, “Okay, I’ll go buy some now.” So, I’m going to do that. Chelsea Ward said new commercial. Yes, we have one that’s running. But, wouldn’t that make for a much lower monthly payment if you put more down? No, not necessary. It doesn’t change your down payment that much. Here’s the thing, though. You never want to strap yourself financially in a cash position.
Tulsa Mortgage Steve: Because, if something happens and that’s why we have mortgage insurance, because you don’t pay. So, if you totally take all of the cash you have out of the bank and put it down on a house, here’s the problem. You lose your job, you lose your income, you lose whatever, you get sick, the only thing your equity in your house does for you is equity-ing [sic] your house.
The only way to get it is to get another loan which you on a cash out, you’re only able to borrow 80%, unless you have FHA of 85%. You’re going to pay a much higher mortgage insurance premium to do that or sell it. So, now, I’ve taken all the cash out of my bank account. I have none at stake. I’ve put it all down on the house and just because I didn’t want to pay mortgage insurance. And then, I lose my job. I have no cash, I have no income, I get foreclose on my house and now I lose my 20% down. Boom.
Tyler: Well, how about this? So, not only that, you have to sell your house all of a sudden, you put your 20% down. You’re trying to recoup costs, because you’ve lost your job. So, here you are selling your house. You have to pay two realtors commissions, a total of 6%, $106,000 on your $100,000 house. Assuming you’ll sell it for exactly what you pay for it which is 100 grand. So, you’re already out six grand that you were going to make on the house. And then, maybe, the person buying your house asks for 6% and closing cost. So, you’re going to help them out. So, there’s 12 grand. You put down 20. Your recoup is $8,000.
Tyler: That’s it.
Steve: This is true.
Tulsa Mortgage Tyler: That’s it.
Steve: And if you didn’t put it down though if someone could argue that now the — I’m going to lose money when I sell my house.
Tyler: Not necessarily.