Let's Talk VA Loans | ep. 41

What's up guys? Welcome to tonight's stream. We're going to be talking about a lot of different things about the VA Home Loan Benefit, but the one important thing I want to make sure we are covering is going to be answering your questions, whatever questions that you have about the VA Home Loan Benefit. I want to answer them for you right now live as we go through tonight's stream. Please do not think you need to wait until a specific period ask questions in real time. I want to do my best to answer those questions as we're going through tonight's stream. So whatever you have on your mind ask away. I want to answer them for you and make you have the ability to get the most out of what we're covering tonight. If you haven't already do me a favor like and subscribe if you're not already a part of the community join it because this is only about the VA Home Loan Benefit. We don't talk about other loans here. We strictly talk about the VA Home Loan Benefit. If you want to get more resources about the VA loan, I have got things in the description down below for you to check out from in-depth videos about specific topics around the VA loan to also a free VA loan e-book that you can go ahead and download and it will give you access to everything that we pretty much have talked about on this channel from specific videos to also things that could potentially help you along your home buying or refinancing journey. So if you want to get that information click the link down below in description, it'll get you free access to that as well. I appreciate you hanging out and being here with me tonight. Let's get your questions answered and get into it. What's up guys? Thanks for coming and hanging out with me again on this Wednesday evening. Last week. We had a really fun conversation with a friend of the channel. We had Travis Wynn join us and after last week's conversation. I felt you know what we should do more of the conversation type of live streams and topics. So that way you guys can hear from other people and their stories and experiences. So I wanted to keep that going and this week I decided to bring in another friend of ours. His name is Lee and I wanted to thank Lee for being here with us and sharing some of his insights in regards to his experience, but and also his personal experience. So thank you for being here man. Of course. Thanks for having me. This is a this is an awesome opportunity. Absolutely, man. So I mean without obviously you to having you tell me your entire life story because I don't want you to feel like you need to just like dump everything out in front of us here, but tell us a little bit about you and you know, obviously you're a veteran. So if you don't mind sharing with us a little about your history in regards to you know, branch of service also your VA loan journey on a personal level. Yeah, I mean my my journey starts in a place. You guys probably wouldn't guess where I was born and raised and I was born and raised in Oklahoma. That's where a lot of people don't guess that's where I'm from. Everyone always typically says California, but yeah, I spent the first 19 years of my life there and you know, we came from very humble beginnings. My family to include three siblings that are much older than me. They actually immigrated to the US and settled in Oklahoma of all places in the late 80s. And then I was born about four or five years later. And then yeah, so we were basically technically the first generation of our family to be born in the United States, which is pretty cool and kind of a kind of a scary responsibility to kind of make sure I do right to buy the drones. They went through to get to this country because hey, that's a that's a long story in itself to how my my family took basically two years to get to the States. So that's that's a crazy nutty story in itself. But yeah spent 19 years in Oklahoma and I wanted to get out of Oklahoma. So I thought what's the best way to get out of Oklahoma and have not a reason to come back and most people, you know, they either go to college or or they join the military. That's what we do in the Midwest. That's how we move on with our lives. So of course I decided the military and out of all the branches. I realized the Navy was one of the branches that there is one out of like I guess five at the time was there's no way I would be stationed there unless I was going recruiting right? So there's no bodies of water that we could be serving on. So join the Navy right out of high school at 19 years old went in as a what's called a nuclear propulsion plant operator. Basically, my job was to maintain nuclear reactors on the submarines and aircraft carriers. So the platform I ended up serving on was the USS Michigan blue a 727 Ohio class submarine. Basically, have you ever seen active valor or hunter killer? That's the same type of submarine. I served on we did all the Navy SEAL team support missions Marine recon support missions reconnaissance missions. I'm not not allowed to talk about for like the next I don't know 25 years. I did that for about seven years and then got out and became a loan officer that really specializes in VA home loans as you know, and then yeah, but I bought a used. No, I just found out right now actually that you do. Oh, really? Yeah. Okay. Yeah, so I joined I joined the sorry when I joined the Navy about four years later when I first got to Washington. That's when I bought my first house using my VA loan and that worked out really well. I was bought a bought a condo on a short sale at that time. It was like really like $67,000. So really bad with view pretty pretty good view water view of you know, Seattle and all that stuff. So that's actually good. I think it's worth like 300 now. I still have it and live in it actually and then two years later, which funny because in my time of buying that first place, I didn't know what I was doing. Nor did I know I was using my benefit to be honest, and I didn't know until about two years later when I was doing some research just because I always had a natural attraction toward real estate and and that side of being an investor at some point. So I wanted to see what else I can do and found out using my VA loan and I could potentially use my VA loan to buy another house. I had my sights set on this duplex. So I went into a bank that helped me the first time should have it and just to see maybe you know, there's maybe they can help me out this time and they basically said no, but they gave me a pre-approval letter anyway for something that I couldn't do kind of weird there, but it all worked out in 45 days was able to close my first duplex and what was cool is that at that point I didn't have to do anything with the condo. I could move out rent it out move into one side of the duplex move rent out the other side of the duplex and move in a roommate. So my last 12 months of the my Navy career, I didn't pay a single thing on living expenses. I was making a kind of positive rent positive cash flow and what was cool is that my e6 paycheck was mine. I got all the BHBS base pay so that was that was a really comfortable man. It sounds so bad. It and like thinking about it was like I didn't know what I was doing like that was that I didn't think it was going to work out like that to be honest and it just did so but yeah, everything worked out serendipitously like it was pure luck guys. Like it was not something I had planned I was I was hopeful but it was very much just figuring out as I go and it worked out. But what was tough is that knowing what I know now things could have gone so bad so quickly. So but yeah over the over time so I bought that duplex in 2016 a year later. I transitioned out of the Navy went into this business. Of course, I couldn't really buy a house until I made money. Well, that was that's the tough thing about being a loan officer is you gotta wait a couple years to make money and then six years about six years later. I think about last year I end up selling that duplex and taking the equity to buy a commercial property where our office is now. So in a sense, I used my VA home loan to buy my first commercial property. So that's pretty cool. And that was for which that was for the duplex you sold. Yes. Yeah. So we had to do a 1031 exchange all that stuff. But yeah, it was a pretty easy process. Like it was pretty cool to be able to take the equity and move it forward to a commercial property, which is now rented out to our company, which is kind of funny because I am the employer and the landlord. Yes, you the company. It's not the first time. I've seen that before actually. So yeah, that's that's fascinating. I so and here's the cool thing about this for those of you that are watching is I'm learning all this stuff about Lee right now, like Lee did I mean you've had yes. Yeah, we've had some conversations right like more I think business and professionally and stuff, but like we've never really sat in like said like, yeah, what's your favorite color? Yeah, this is like I haven't sat and really like got to know you and but I've always enjoyed this even the small conversations I had with you. I'm like, you know what? I want to bring this guy on and talk to him and and have you guys hear his story as well. So that's this is kind of where we're at. I'm learning all this stuff right now. And this is pretty cool. I so I'm interested in but I want to hear more about what was your you bought that condo. How was I thinking? I have no idea. Yeah, what do you buy? Yeah, when you bought that when you bought that condo, how old were you at the 23? I was 23. Okay, and you had been in the Navy. How long when you did at that point? I was in the Navy for four years at that. So I just as I did because our training program is about a year year and a half and then they had me speak they because I had them fooled thinking I was doing so well. So they ended up kept keeping me on as an instructor for another two years. Okay, so I ended up going from a student to as an instructor for the nuclear pipeline in New York. This is what that's where I was. the condo the condo you have is in Washington, right? Correct. Yeah. Okay. Got it. I'm just making sure I'm tracking and then how long how long were you living in the condo until you ended up deciding that you were going to buy the duplex almost exactly two years. It was probably yeah, it was 2016 and it was about I would say a few months before July of 2016. That's when that process all started where I was doing research at time to look up and I joined this thing called bigger pockets. If you don't know what that is basically the social media for real estate investors and you're the Facebook I guess and then they had this military investing form which I spent a lot of time on because I was like, what is what is this? What's going on? Why is this? Why is this even a thing? Why is this even a topic and I looked at it and that's where I discovered about the VA home loan and what was tough. What was even even in that form? Sure. There were some professionals in there, but no one ever said anything about a specific document or a guideline or a handbook or anything like that. There was no reference to it. And as a guy who was trained in the nuclear pipeline, we we live and breathe by documents and and proven procedures and stuff like that. So it wasn't until many many maybe till the end of the year that I learned there was this document that drip that drives how VA home loans work, which is funny because it was after so I figured it out attempted to use what they were saying in the investor form military investor form. It worked out and then four months later. I went to my first VA home loan workshop. Kel has after I bought the condo and the duplex, right? So after you yes, you'd already bought the duplex that you've already had the condo and that's when you attend. So the workshop kind of just kind of gave me more of like the technical things that I did. Luckily. I mean, I was always pretty pretty decent with my finances. So I would I never put myself in like crazy financial things. I was never really into buying chargers anyway, so didn't do that. But when I when I went into that VA home loan workshop, I heard left. I was like, so that's what I did. And I wish I had known that stuff earlier. Not not that I anything I did was, you know, bad or I regret it. I would just would have probably done it more efficiently, which still it all worked out really well. So let's take that. What would you say is something you would have done more efficiently with regardless of whether it was more on the condo purchase when you purchase the condo or the duplex. Is there a specific one that you think you would have done slightly differently that would maybe put you in a better position. I'd say as far as the condo goes, I think that was the right choice because I was deploying a lot and having a condo that was didn't have to worry about exterior maintenance didn't have to worry about the overall building, you know, because I had I'd be gone for that condo for six months at a time. So buying that condo was a really good idea as someone who goes deployed a lot. I mean, don't get me wrong buying a duplex or any multifamily is a really great idea, but there's an aspect of it where you have to kind of be present to be available to do whatever is required, even if you have a property manager. So it's a great point. I think for me as far as like the the responsibilities of taking care of my first house being condo was very very limited, which is what I needed as someone who is going underway a bunch and as far as buying the duplex, maybe I could have bought a triplex or even a fourplex instead. Maybe but even then it all it's still worked out pretty well. I think by I mean the first couple years I didn't make a whole bunch of money from the passive income. I was I was I was in the green. I wasn't I was in the black but and then by the end of by the end of my ownership of that duplex, I was clearing like 11 1200 bucks a month. So it was it was funny. It was pretty good and that helps because of refinances and things like that. But overall, I mean, I ended with like two hundred and sixteen thousand dollars of equity after six years. I mean, and then rolling into this property like and that's what helped pivot you over to the commercial property that you bought. Yeah, and I basically I mean, it's an office that has a waterfront view. Like I can't really complain. That's pretty awesome. So the you walked away. You said with 216 216 and that was after how long that you own the the duplex six years six years. So I bought so basically it doubled in value in about six years because I bought it for about 260 ish. Okay, so around there. So almost almost doubled. Yeah, almost doubled. So after six years, it may have it doubled. So that was that's pretty fast and you cash flowed while owning it. So that's it was a really tough decision to get rid of that duplex. Like it was really tough to kind of like if I do this purchase of this commercial property, it's not going to make me the same cash flow like it is right now. Not that it won't ever but it will at some point but it'll probably let me if I do it, right? I could probably cash flow more but this is more of a like a definitely long-term equity game. I mean, there's there's talks of people wanting to like buy these properties and build more hotels and stuff like that. So I think after you know, couple of years and things that I'm going to I plan on doing it's going to be worth at least seven figures and set pretty soon. That's pretty that's it was worth 820 when I bought it. That's pretty insane. That's pretty cool, man. That's awesome. It's cool. I want to I want to answer this question. I have I have a question for you, but someone asked a question. If you want you can answer this one. What is the most appropriate way to use VA loan as investment opportunity? Since we're on the topic. I feel like it's a great question. I think it's definitely ties into a little bit of your strategy. So what would you what would you yeah, I'd say so this is I'm coming from this as a perspective as a single person, right? Not someone with family or even with a significant other whether it's spouse girlfriend, but whatever whatever your flavor is I'd say if you're if your goal is to build a real estate portfolio and that is the primary goal on the first like 10 15 years, whatever it is really 10 years. I'd say is by well below your means. I mean that I mean start with the first house and then usually that first house will propel you to a direction that that helps you on the second one. So for one thing for my condo one thing that's helped it up really quite a bit and something I never first saw until like I just knew it was an option was that my condo after some time had a lot of equity. It was it was appraised for like 75 when I bought it for 67, but over time it built more equity and I think about two or three years later. It was worth like 130 or 120 or something like that somewhere on there like low 100s and I was able to take out what's called a heel lock. So I was able to leverage the equity without having to sell it and I was able to use that equity to kind of help with some of the renovations I had on my condo to kind of help it where it be worth more and I was able to actually propel that he locked into other things. So that was kind of cool to be able to use it for even like down payments just another way to access cash. So that's another piece of real estate. A lot of people forget about is the use of equity without having to sell it and then with the VA home on itself is yeah, the double buying level your means is the main thing is that if you can buy a two or three bedroom place as low as you can what you can do is also rent out some rooms and then you're paying a discounted mortgage. You're getting especially your active duty or you're getting all this BH. Anyway, then you have someone else paying your mortgage and then over a couple years, maybe at the next duty station use your VA loan for the next place do the same thing as best as you can Bible below me means maybe around some rooms. You've reached out the other property and just keep doing that at some point. You're gonna have to sell those properties just because they're there gets to a point where the amount of equity you have in the home will make sense for the cash flow you're making. So for example, if I had one client that was trying to figure out should I sell this house? I can make $200 a month, but I have like $150,000 worth of equity. Should I just sell the home and roll into the new one or hold on to it and make more money? So that's another thing to kind of consider is like if you for example, if you have $150,000 of equity or you make $200 a month, which one's more important to you taking the equity make it at something going somewhere else and make probably making five to ten percent or more on the $150,000 which is well more than $200 a month. So there's a lot of things. It really depends. It really depends on your strategy. I think I'm a person that likes cash flow. So all my all my everything I do is in the lens of how do I get to a point where I get more cash flow? That's a great point. I like I like the what you mentioned about buying below your means because that's one of the things that I tell people that know what that buying this house or their this home buying journey. They know I they're not going to stay there forever or even right past three to five years. And even then when I hear people tell me oh, this is my forever home and I have the question I say, how old are you? They're like 30 and I'm like how many houses have you bought and they're like zero. I'm like the chance of this being forever is actually very slim. It's typically people I think and I talk about this on the channel all the time. Like the average American buys a house about three times in their lifetime. And then if you live to be 80, that's a long. That's that's the possibility of moving is pretty high. that's one thing to also consider as well as like if you know that you're not going to be in that house for a long period of time. Then it I think to your point buying below your means is almost I want to say mandatory, but it should be a big thing. So that way you have the ability to set yourself up for the next house and you're not overextending yourself because some people make the mistake of thinking that oh, if I even though I qualify for more house, I can buy an $800,000 house and I can rent it for more because it's an $800,000 house and it's like that's not how it exactly works. Some people think well bigger purchase price means more rent, right? And it's like no actually. At some point there's a breaking point for sure. You could really I've seen people make that mistake thinking that's going to make them more rental income and it actually creates a big. Yeah. Yeah, I definitely agree with you on that because you're like I'm buying more house though. It's it's like yeah, but you bought another you bought a bigger more expensive three bedroom two and a half bath two-car garage that you probably could have got maybe not as big maybe not as nice maybe not in the nicest neighborhood that still rents for almost the same amount as the same house and your payment is is two-thirds of the price your money. So I know I totally agree. I think the mindset of a renter versus a homeowner are two different things. Very especially when you become a homeowner or become a home someone that's shopping for a home. It's two different mindsets. You know, yeah, for example, you you as a renter you just care that the faucet works as a yeah homebuyer you care like what type of faucet, you know, if it's a grass or a brushed nickel or something like that. yeah, it's it's it's it depends on the journey for sure. I think it depends on the goals. I talk a lot of to a lot of my clients like what is your goal is your goal to have equity is your goal to have cash flow one. They both can help each other and then maybe you have to do one of the other to help with the other but what is your primary goal at the end of the day? That's an important thing to kind of recognizing yourself kind of like, you know, kind of self-discovery journey there. But I think also, you know, investment opportunity is also a very broad broad term. Yeah, that's the other tough thing to figure out because one of the things I also want to inform a lot of people about is that, you know, your first house if done the right way, you know, and and your pain on it, you know, you're not doing a you not you refinance for the right times when the payments are getting lower and all that stuff. If you do it the right way after three or four years of ownership. If you if you do it, sell it just right. You could set yourself up financially potentially for the rest of your life. If you do it, right? And the reason why I say that is because what ends up happening what and I've seen this so happened to so many of my clients who've bought their second or third home is that they buy their house. They have nearly three or four years. They sell it because they have to go somewhere or have to move up. They have to take the equity and pay off. They have to take 90% of the money. They made off the sell the house to pay off debts and debts are just is the opposite of generational wealth. I mean, yes, it will help you get back to a neutral position. But if you have less than debts to pay off, that means more of that money goes forward. And really that that should be that should be the really the primary focus when it comes to investment opportunities because those debts really hold you back. They are weight. They are the weight of your financial position because it's it's it's purchases that you've made that you didn't have the money for at the time. Put forward like put the sooner point, you know, so yeah, you know, the more debts you have the more it holds you back from investment opportunities. So, but yeah, if you if you don't have debts to pay off in the in the from the profits of in the cell of your house or have very little to pay off. That means that money can start making money for you instead. You start putting that brokerage accounts. You can start if you make enough you can literally buy a house on your VA home loans zero down. Maybe pay some closing costs and then buy an investment property, you know, like that's that's generational wealth right now. You're setting yourself up. That's Monopoly. That's where you're trying to like make some moves because of that first house. So I think that that use of that first house is so vital as long as people recognize that it's I think what I hear you saying is it's it's not just about the decision-making on when you're buying the house. It's also the decision-making on as you own it, you know, there's there's more to just the getting into the house as well. It's also what do you do between now and when you're ready to convert this to a rental or like like we also said selling it and taking that equity and what and then what your options could be with that equity versus what they may have to be with that equity. Absolutely. That's that's I love that answer. Actually, that's I haven't really heard that answer before. So I really like that. I want to go back and actually talk about the the condo. Okay. One of the things you had mentioned was you had bought the condo while you were deploying a lot. Yeah, and it's a very common thing that I hear from active service members that either whether they know they're deploying a lot or they are sorry whether they know that they are going to be deploying a lot or whether they don't but they're in the back of their mind. They're thinking well, I'm not going to be here very much what I guess was going through your mind on I'm going to buy a house knowing I'm not going to be here because in a lot of people's mindset. They're thinking the last thing they're thinking about is at least for the most part is taking on a big responsibility. Yeah, kind of what was going through your head on like saying I'm going to buy this even though I know I'm possibly not going to be here at that is yeah. No, that is a great question. Are you just realizing that right now while we're talking? I am just not realizing that right now to be honest the reason that to answer your question. That's not what I was thinking about what I was thinking about was I was I actually remember it because I was looking on Redfin and I was and I was looking at places to rent. That's what it was that would have boiled down to and I was comparing a studio apartment, which was like 800 bucks at the time and I was comparing buying a basically a buying a place and what would it look like to buy a place? It was just a simple that simple of a question. So I looked and I found this condo for about 75. I was I think was like at the time it was $90,000 and I looked at the numbers. I was like, that's a two-bedroom condo one bath condo mortgage payment 600 bucks. I was like, well, I just buy that and then that that was it. That was that was it. That was all that was all I went on as far as the payment goes. It was more at the time. It was just more bang for my buck to just buy a condo as far as the monthly payments concerned and and on top of that I was like, well, at least I know I'll own a place. So that was that was as simple as that conversation was so yes. Yes. It was simple as that. No, it was didn't overthink it didn't know. No didn't think about the stuff. I know now about real estate. I mean, it would have changed my decision to be honest. It would just probably, you know, probably made me I mean, I don't know how much more excited I could have gotten. I mean, I as soon as I saw the numbers I reached out to the first agent I could have talked to and they told me to get her pre-approval and that's what I did the next day as soon or the next day off I had so I jumped it on as soon as I knew I was coming to Washington. So were you renting it while you were away or did you have no? No, not while I was employed. I did end up renting it when I moved into my duplex. Got it. Well, which makes sense. Okay. Yeah, and then okay and you moved into duplex now sold the duplex on the commercial property. So you've had the commercial property now how long a little over a year and a half. Oh, okay. Cool. Okay little over a year and a half and you and you talked a little bit about like the equity gain there as well. You said you had some because say again as far as the commercial properties ago, right? Yeah, like it's gained a lot of equity in there. So and you're currently now living in the condo. So like what's your long-term play on on the VA loan? Like where do you see yourself going from here? Where do you see yourself? Yeah, that's a great question property right now. I'd say a lot of my focus is just improvements on the commercial property right now. I could buy another place if I wanted to there's some things I have to wait on but I effectively have my full VA to use because of the condo I did some stuff with the condo to basically get my entitlement back. So that's all pretty much figured out. So I don't have to worry about this and the duplex assault. So I have I'm fully entitled like I have all my baby back. Okay, you know, I could get entitled. Yes. Yeah, and I might be a rating at 50% so I could easily buy a house if I wanted to I think the next I've been playing around with the idea of buying another multifamily and and playing around the idea of potentially doing using my VA custom construction loan to build a fourplex with modular homes. I'm starting to realize how unfeasible that is especially in Washington State. So it's very difficult. Why do you say that? What's that? It's a little pricey in your neck of the woods. It is. Yeah. Yeah, just a little bit just a little pricey. So not only pricey but also there's a lot of administration and a lot of money to throw at people that I don't want to throw at people. So it's going to be it's I want to make sure that the next decision is a strategic one, but there's some other things I had to set in place. But yeah, right now my focus is just how do I improve the property here? How do I get the cash flow up and some plans I have to execute on? Nice man. Well, you're also somebody who I look to as a little bit of also a market expert and I'd love to hear your thoughts on where what you think the state of the market is when it comes to you know, where you think the housing markets going where you think mortgage rates are going. I'd love to kind of get your take on that and what you think those that are watching whether they're some of some of the people watching could be most of them are I would say going to be home buyers, but there's a few that also are watching because they're considered. So what would you say to those people as far as what's going on in the market today? Okay, gotcha. I'd say as far as the real estate market goes as far as housing specifically housing. I think it's going to be fine where we've been and since even since rates have gone up to like the eights and high sevens and low eights things like that. We're still technically in a low inventory market. Even with home even with the amount of home buyers that the amount of home buyers have gone down obviously because rates going up. So anyone I was able to buy a house when rates were high are going to be in a really good position when rates start to go down even more. So I think overall housing. I think a lot of people were I don't know. I think at the beginning of 2000 I want to say 2022. I think a lot of people were scared that there was going to be another housing bubble, which you know, I think the word housing bubble shouldn't be in existence anymore. I hate the fact that the media is still using that term just because they don't fully understand what what a bubble actually means. I mean, I maybe they do and then they're just doing it on purpose to just get views and that's probably what it is. The benefit of the doubt. So I think that's what it is. But I'd say that as far as housing and home prices, they're still going to go up. They have gone up. They haven't the only time they went down was during this 2008 and 2000 around 2008 2010 housing crashes. But guess what happened about three or four years later. It came back up and now it's much higher than what it was. So I think the demand is still there and I think housing inventory is going to have a tough time staying keeping up with demand. Yeah, it's simple supply and demand. So I think when it comes to home prices with us being in a low inventory market where it's where it's shifted more into a buyer's market right now as rates come down. It will shift more into a seller's market home and there's going to be so much more demand with a little supply. We already have there's not enough homes to be built, especially with how birth rates have been since the 90s. I think there's going to be even more home buyers that come out of the woodworks over the next couple of years and housing will be fine. I think well, I would say housing. I should say it should be fine. I'd say housing is home. Appreciation is going to exist, right? No matter what as long as there's demand for housing. Now, as far as mortgage rates go, that's obviously the big volatility factor. That's what it's impacting a lot of people's ability to buy right now. And and they have gone up. I'm not kind of not even a sugar-coated. They've they've been at their worst. A lot of people are still asking about oh, you know, yeah. And and they peaked basically last year in October and they've kind of and slowly been creeping down and we had a really good run between May and the end of September. So to kind of give it I went to a really cool mortgage conference, but with our company a couple couple weeks ago and we were able to meet one of the biggest speakers speakers is very Habib who which who I follow religiously on every morning and he was able to come and gave us a speak and talk and how he intends or how he forecast rates are going to be he's he's obviously one of the best forecasters and mortgage rates in the industry. He's won awards for it and sometimes back-to-back at least one of four times, but he's essentially has forecasted that rates will go down next year. We've got probably looking at the mid fives low fives high fours in in by the end of 2025, which is a really good time for a lot of homebuyers that rates come down because for those who are homeowners, they're going to be able to refinance and for those who are homebuyers, they may have a bit of a tougher time because they're them and their grandma is all going to be waiting for rates come down so they can afford to buy a house which sucks because when that influx of people into the market the more demand you have that's what causes home prices to really go up and we saw a glimpse of that in I think I want to say early 2022 where it at least in Washington. It was just nuts people were offering like if you sold if you were listing a 500,000 house, it would sell for 575 on average. So it was nuts like people are taking out loans and submitting offers way higher than listed price. So yeah, that's that's I think that's the state of our market. But I mean if we kind of take a look at rates, are you able to bring up the screen? I can kind of show everybody. So yeah, so if you guys want to know what this look what this is, this is what I compared conventional rates and VA rates. They trend about the same as but VA rates are typically lower. That's the orange line. But what I want to what I want to point out is that since November of last year, we've on I've been on downward trajectory noted by all those blue lines, even the peaks are lower than the previous one. So the trend is there for rates to start going down. Even the valleys that the low points are even lower on the next ones, but I want to also say that, you know, a lot of people believe have this thought and it's not bit by any of their fault. It's just obviously another media thing is that, you know, they we all believed there was a there's a consensus out in the general public is that, you know, the the Fed rate and the mortgage rate are effectively so tied to each other at their sector. They're they're directly impacted by one another and that's simply not true. You can kind of see that in the end of sorry mid-September the Fed lower the Fed funds rate by 0.5% and everyone's like, oh the Fed lower lower rates. That means mortgage rates get better. Well, the the dashed line of dash to vertical line. That's when the Fed lower their rates and you can see about two weeks later as soon as we hit October rates shot up. So rates were already going down before the Fed even touched the Fed rate. So I hope that this kind of further proves to a lot of people that the Fed rate and the mortgage rates are not directly tied to each other. They can't influence each other depending on what's going on with bigger economic outcomes. So it's kind of a kind of an interesting note there to kind of show that they're not directly tied kind of further pointing it out. Thank you for sharing that man. And I guess this leads me to my next question on what do you think is the what do you think is the possibilities or I should say, let me let me rephrase this. Where do you think mortgage rates could go between now and the end of the year? And then where do you think rates could end up this time next year? Whoo. I'd say by the end of the year man. I just hope we get to see what we saw in September to be honest. That's what I hope agree. Yeah, we're I'm hoping we're at the top of the peak in the next couple of days. And then November December you start seeing that downward trajectory again, and maybe we see the numbers we saw in September. That's that's I'm that's my hope. Possibly towards the end of next month. Possibly. Yeah, like possible. Obviously, it's possibly respect. Absolutely. Yeah, we're definitely on it. Yeah, there is a little kind of some research they've done in the past and they've noticed that for some reason every October for the last two or three years rates just shot up for no reason. And they've noticed that it's kind of very it's a very interesting note about that. But you know last year, I believe in November rates went down pretty substantially to the point where we able to like relock a lot of clients for a better rate while they're in transaction. So I'm hoping that we may see a similar thing and let's see what's nice about you know rates is that they're just as volatile as stocks are they move up and down on a day-to-day basis and five times a day six times a day just whatever happens, right? So they're just ebb and flow with the market. So they have their cycles. They have their peaks and their valleys on a day-to-day basis. So yeah, I want to say that by the end of the year, maybe in December timeframe, we start seeing rates where we saw in September and then by by next year, I really hope we see low fives again. That'd be great. You know, that's that's a lot of clients that could refinance and save a few hot few hundred extra hundred dollars on top of the some of the refinances they did this year. So our friend is saying 5% with a question mark. I think what they're asking is you think 5% will be something that's going to be a possibility this year. I I mean to maybe like buy down to get to 5% and if you want to spend some money to get a 5% I mean I had some clients that bought down in their refinance to get 5% but to yeah, but as far as like the the what we call is a par rate the rate that doesn't cost any money. I think that's not going to be until next year. Okay, as a part we're saying as a par rate and for context, you want to tell people kind of what a par rate is. Yeah, the par rate is basically the rate that doesn't cost any points or doesn't cost any money to get that's essentially what the par rate is. Every lender is going to be very different but they're all around the same number. But yeah, I'd say the par rate for next year. We'll probably I mean, I hope honestly this is a hope mid to low fives. I hope I like that. I like that take I think we're somewhere actually. I feel like we're about the same. That's kind of one of the things I was thinking about as well is is something that you can do and yes, you can buy down with VLG. Yes, you can do that. So before I wrap we wrap up. I want to ask you what are some things I guess if you had to leave people with on like what are maybe two things you think people could use in the current climate that would help them be able to navigate their home buying journey and make it a smoother one for them. I used to like it wasn't insider tips or just like so. Yeah, it's a really good question because there's so many things. I mean, like everyone's going to be very different with their finances. It's it's like a snowflake in some way. Sometimes it rhymes a little bit, but it's never always the exact same as a home by like like give me some more context. Yeah. Yeah, so or let's do this. What's one thing you think people need to avoid? What's one one common mistake that you see homebuyers often making that could be avoided and it could be avoided by maybe knowing and watching this video before they start their home buying journey, you know, web and being your own finances. That's what it is. Okay. Yeah, I think I think a lot of people try to self-diagnose their finances. Yeah, and they try to evaluate their own finances in return and in thinking that they or I guess I shouldn't say think but evaluate their own finances such that it may keep them or thinking that they're ready to buy a house and I'd say don't don't self-diagnose just because us as mortgage professionals look at your finances completely different than most people. I mean, there are some very common foundational things. Of course, you want to keep your debts low and things like that. But for the most part, there's some more finite surgical things when it comes to getting pre-approved with the house and I would also say I don't mean to add another thing. I know you said you one thing but yeah, it's self-diagnosing your own finances get with professional that actually wants to help you I guess because and it is how you know, they're not wanting to help you is that if they give you just a letter and then explain what you can do to improve or what things that keep you from this or or why you're at you're at where you're at with your finances. Yeah, like someone who's an advisor some talk to someone that's an advisor who understands finances to a personal finances where they can help you kind of like put you in a better position. Or if you're not sure and you're you think you need to work on these things and all that stuff. I'd say yeah, still get with a mortgage professional that wants to help because you want to make sure you're putting your money in the most efficient manner because you may be throwing money at something that actually doesn't work at all. Like they want to pay off this loan. I was like, well, you should really pay off this credit card instead where it's very individually based. That's the main thing I'd say. Yeah, don't self-diagnose finances. And the second thing I'd say is that a lot of people have been and this is not like the consumers fault. This is more like the professionals fault, but I think a lot of mortgage professionals out there where if it's at a bank credit union, whatever they treat the pre-approval process like a on and off or a pass or fail, which is just just it's it's a consultation. I treat as consultation not an evaluation because it's it's meant to just tell you where you're at what a lot of people end up getting if they if they can't get approved is just that you suck letter until you go away. And I think that's just a just a bad way. It's just bad customer service at the end of the day. That's what it is. So if if the if you can get with the mortgage professional that's willing to help sit you down tell you like, look, this is why you do suck, right? This is how we can surgically help you and make sure you're putting your money where it really counts not where your money where you think it counts. Then this could really help you. I mean, I've had clients pay off collections. And as you know, sometimes paying off collection makes your credit worse, you know, so that's an example. A lot of people think oh and I've had clients who've listened to a mortgage professional tell them. Hey pay off this collection and we will be fine. And then next thing, you know, now they're below the credit score limit that's allowed for that lender, which is crazy. Now you're now that mortgage professional literally steered you wrong. So now they're saying now we have to wait for your credit score to come up. So I think that's those are the two main things. Your pre-approval is a consultation in regards to your finances. You don't have to move forward with buying a house at that time. You can wait and don't self-diagnose your finances. There's professionals out there that want to help us. I do it all the time for my clients. I mean, there's yeah, those are the two main points. I'd say I like that man. I really like that a lot and I talk about I use the same term self-don't site don't self-diagnose because it's one of the biggest mistakes you can make. So I love that. I'm glad you I'm glad you sure that my buddy Danny who is an agent out said, can I get a Lawrence? They give us a hug. You actually get a higher interest rate. Blaise is sorry to interrupt. Just want to ask seen a few videos, but could you go over DTI again? You want to talk about DTI? Sure. So DTI is a term that stands for debt to income ratio. So this is how a lot of programs have what's called the DTI cap, which is the max your debt to income ratio can be for a space a given house. So this is how we measure your finances and regrets to like your payment your debts in relation to your income. So for example, the one that we use quite a bit something called the back-end DTI back-end DTI is essentially all the monthly debts all the monthly payments on your credit report plus the future mortgage payment and what percentage of those things are of your income. So if the mortgage payments $2,500 and you pay $2,500 in debts and you make $10,000 a month, then those combined is $5,000 of debts. Then that debt to income ratio is at 50%. So that's an example just just as a number out there. I hope your debts aren't $2,500 a month. How would that how would that apply to a VA loan though where somebody is looking at obviously qualifying for a VA loan and how to how is that the income factored in because I talk about that a lot here on the channel to about qualifying guidelines or VA specifically VA guidelines as well and how residual income works. So I guess what would your what would your take be on that? Yeah, they've heard me talk about it enough. Yeah, a different perspective. No, I think that's really it's mentioned that so I'll guess I'll speak it in terms of like different requirements. So as far as the VA home loan is concerned as far as this their specific guidelines and handbook requirements, you know, the VA doesn't have a DTI cap. They use as you mentioned residual income basically your net balance sheet and making sure you have enough money left over to feed your family. It's it's kind of low number. It's kind of weird strangely weird number. It's basically a family on food stamps and a ramen diet, but but as far as the VA lenders have been for one person to that. Yeah, I know exactly. It's like 500 bucks a month. Then I was like I can buy a house. I think if you add the 20% yeah, it's like five. It's crazy. It's like five six hundred bucks is crazy. Yeah, so but yeah, yeah as long as it's main is residual income. Now the thing is that there's other institutions lending institutions banks create unions, whatever they may have a DTI cap and that's where we run into something called lender overlays. So this is a big thing. I've started teaching this more and it starts to it for some reason. It's starting to blow people's minds. And I guess a lot of people didn't know this is that every lender and every bank out there will have some sort of lender overlays. Some may have more than others. Some may have the same but what essentially it is is extra requirements on top with the VA loan allows for example DTI cap the VA loan doesn't have a DTI cap but the bank that you get the VA loan through which are the ones who have the money to give you the loan may have a cap. The reason why they have these lender overlays is they have investors and shareholders to protect so they want to make sure they're giving loans out to people who are who are going to pay on the loan. That's that's why these lender overlays exist. They're not doing anything bad. They're not trying to keep you from my analysis. Just how businesses ran if if they wanted to if they denied you if they wanted to deny everybody they'd make no money. Yeah, exactly. Like they want you and I'll try to tell people is the bank is not out to get you. Yeah. Now, I'm sure some people may have different rules and requirements that are more strict than others. Yeah, but if they loaned out no money, they would make no money. Correct. So the intention you would make no interest on those savings and checkings. Yeah, right. Exactly. And so but one area that I would say is misunderstood or can be misconstrued as well as when you run into the situation where you maybe have the lender that doesn't have the DTI cap that's in place, but the file is going to look a little bit riskier, which now means it potentially becomes a manual underwrite, which I've done videos on this channel. I have a link down below as well on what is a manual underwrite, but essentially there's a higher risk threshold that's now in place. So the lender is going to scrutinize you even more outside of whatever guidelines they may have. So maybe they don't have an overlay for debt to income ratio, but because your credit scores, it's like an over encompassing check of your financial home, right? But they're going to do a bigger deep dive to do their due diligence to say, why should I loan this person money? So then what can happen is you can actually run into the situation where they maybe don't have an overlay if their system approves you, but because the system didn't approve you and you're trying to get them to overturn that decision. They're not going to say, well, we now have an overlay here. Yeah, the best way I can describe it is that we're going to court. That's what we're doing. Yeah, we're trying to go to court and appeal that you can be approved to buy a house with your VA loan, and we're trying to write a story and appeal to a jury and all this stuff. And sometimes it works. Sometimes it doesn't. It's really determined on the underwriter discretion, but also depends on how the loan officer team packaged it sometimes too. So, I mean, there's times where you do your best and you can't, you just can't, it doesn't work. But sometimes I know some lenders don't even have the option to manual underwrite files that don't get the system approval that we hope. But yeah, I mean, sometimes, yeah, as you mentioned it right, is that sometimes the denial isn't or one thing I want to add is that the denial is not always a VA home loan denial. It might just be the denial for that specific bank. So that's a great point. Yeah, I would encourage a lot of people to if the person you're working is not a specialist and doesn't explain why it's a denial. Sometimes the denial is very much specific to that loan officer or to that lending institution that the loan officer lending institution. So that just means you can get a loan with that bank. So it's best to get with the specialist and make sure that is it's is this a VA home loan requirement or is this a lender overlay? Because those are the two questions you get asked at it for denial, especially when it comes to credit score and DTI caps things like that. There's dozens. There's there's so many different types of overlays. It's really hard to list, but that's what a lot of people, you know, that's where a lot of the misconceptions come up is because some of these loan officers don't know the difference between a lender overlay and a VA home loan requirement. I didn't even know what lender overlay was until like two years into my career. Luckily, I was another serendipitous situation is that I was with the company that didn't have those lender overlays. Yeah, so everyone does it. Yeah. Yeah, this is how everyone does it. And I was like, oh, I guess not everyone can do it this way. So yeah, it's it's kind of a kind of a tough situation to be in as especially as a consumer because there's just so much information out there. I really wish if we could make one change in our education system is our literacy financial literacy. It's just it's really tough to kind of watch how you're reaching. Yeah, I'd say it's really tough to watch people in these financials turmoil because and want to buy a house and they can't because of the decisions that were made, you know, and some of those decisions were fully in their control and they had a choice. So it's kind of kind of a tough thing to see when people put themselves in this position and they have to make decisions that are very desperate and not from a good place. So and yeah, I always I always say that, you know, the finance is a person really determines their sometimes their emotional intelligence in a way. I love that. That's awesome, man. Well, dude, I appreciate you being here and hanging out with me and hanging out with us and answering some questions and sharing your story. I learned more about you than I knew before we did this. So I'm actually glad. I'm really glad we did this. Yeah, I think did I miss it was yesterday. I messaged you. Yeah, it was just yesterday. Yeah. Yeah, it's like it's like a long time ago. That's how much we plan this. I was like, hey, dude, are you available tomorrow to come on live with us and you're like, yep, and then I'm like cool. Here's the time. There's no script. No, nothing's like here. We are. Yeah. I loved it, man. This was a lot of fun. I'm glad you came on and you shared some really good insights. I learned a lot. Not only about you, but just hearing things differently from a different perspective. You can always learn something from somebody else and I and I say that very openly. I've been in this business eight years. I've strictly focusing on VA loans, but I tell people all the time. I am learning things almost every day. If not at least once every week because you maybe just hear something explained differently. There's so many things that go into this VA handbook. I remember I first printed out the VA handbook is over 500 pages and Oh, yeah, it's not it's not small. Like it's it's really not so for someone to be a jack-of-all-trades the master of none is very real. If you don't do this, it's very it's a great. It's great cure to insomnia. Tell you that. Yeah. Yeah, that's for sure. So I appreciate you guys hanging out with us. I appreciate you being here man, and we'll catch you guys next week. All right. So that's all I've got for you guys tonight. I appreciate you guys asking all of the amazing questions and for hanging out with me and hopefully learning more about the home loan benefit than you did prior to watching this stream. If you got value and you haven't already subscribed and joined the community do me a favor subscribe join the community is completely free and also like this video because it lets the YouTube algorithm know that it's valuable and it will allow it to be shared to more veterans who need to know his information. The last thing I want to leave you with is the most important thing. Jesus loves you and he paid the ultimate price for your life. So if you turn to him trust in him and believe in him, he has a beautiful plan and purpose for you.