Jared Bahr: [00:00:00] Rates do tone down. Just refinance. We want to talk about prices. Go just skyrocketing again. I mean, it's, we're gonna, we're gonna see your houses really go up in value. Yeah.

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

Now your hosts

Jeb Graham: welcome to Metcalf [00:00:45] Money Moment podcast. My name is Jeff Graham and I've got co-host Eric Wymore and Ethan Hutchison, uh, with us here today as well as. Uh, Jared Barr from Arvest Bank, who's a senior mortgage lender at Arvest Bank. Also my neighbor, [00:01:00] also a guy that I've beaten in golf. Most of the time we play, but not always.

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

You know, the last few years have been pretty crazy in the real estate market as well as the mortgage market. It was like we had years and years of people [00:01:30] getting, you know, two and a half percent 30 year mortgages or, or 3% 30 year mortgages. And those days have been gone for the last couple of years. And so I think, uh, maybe we can start today by just talking about.

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

So let's talk a little bit about [00:02:00] what rates actually drive mortgage rates when they see their 30 year, 15 year mortgage rate out there.

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

And then we have historic low interest rates where, you know, we were selling two and a half, 3% interest rates on 30 year face mortgages. And then COVID came, and then everyone started buying [00:02:30] when all the money entered the market. Right. And then now we've had these. Massively high interest rates where the fed essentially, you know, said to term, uh, inflation that we had to raise the federal funds rate.

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

So. [00:03:00] Um, as far as, you know, what we're seeing when, when the Fed, and we're talking about Jerome Powell, as far as what are these interest rates doing? What is he gonna cut those? What we're referring to are your short term rates, right? So those are your credit card rates, your adjustable rate mortgages, [00:03:15] auto loan rates, anything that you're financing for a short period of time.

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

And when Jerome Powell says he's gonna [00:03:45] cut rates sometime in the near future. He's talking about short term rates. And if you're looking for that 30 year phish rate, that's not gonna be necessarily tied to those rates. For instance, I think, what was it about this time, August, October, September, [00:04:00] right around there last year when Powell cut rates before the election.

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

And so we had a na, we had that net negative reaction there. The 10 year treasury. I think what we're gonna see this time when the Fed does cut rates [00:04:30] is that 10 year is gonna come down because we, it, it appears that we've got inflation under control. When you guys agree.

Eric Wymore: Yeah. Yep.

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

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

Eric Wymore: We're close.

Jared Bahr: We're close.

Eric Wymore: Yeah, definitely. Well, according

Jared Bahr: to a lot of [00:04:45] people in the media, you know, inflation's weighed, we been lower.

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

But the challenge, [00:05:00] I think just in this world, and I don't wanna take this down a different track, is that. Uh, is the fact that everything did during that window of time become 30% more expensive than it was Right. You know, two years prior. So, so we're never getting that back. But as far as the, the, the forward looking rate, [00:05:15] yeah, it's, it's definitely tamed down a little bit.

So, yeah.

Jared Bahr: Which is good to see. So, yeah. Um, but yeah, so hopefully we once, you know, we see some federal funds cuts from the, the Fed that we will see that translate over to loaner, [00:05:30] fixed term rates starting to come down, but. Uh, uh, at the end of the day, whether it's an adjustable rate mortgage or it's a fish rate mortgage, my money's in the adjustable rate mortgages right now.

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

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

Jeb Graham: that's a, that's a good thought process that I don't, you know, I hadn't even thought about that. Right. So like, if somebody's buying a house right now, they're not that excited about buying it [00:06:15] at the price they're gonna be buying it at and the rate that they're gonna be buying it at.

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

And maybe that's, uh, that's maybe making me sound old, but like I remember, you know, graduating college and buying, you could go up into Roland Park and buy a [00:06:45] $95,000 little house and, and stuff like that. And I think the challenge, uh, to me the biggest challenge not to take this down a different road or people getting outta college and, and trying to be first time home buyers and how much of a challenge that is and.

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

Jared Bahr: Because you're never gonna see houses cheaper than they are right now. Right, right. Even when you're in the recession and houses dip for that moment in time, look where they're at now. So, real estate, long play, I feel like you can't go wrong with it, but if you are [00:07:15] so infatuated or assessed with that interest rate that you think it's a bad time to buy, wait until you, you know, you're, you're gonna be trading interest rate for the higher price of the house when rates do drop.

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

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

Jared Bahr: Yeah. It makes sense.

I mean, [00:07:45] you, you, in the long run, do you ever lose money on real estate?

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

Eric Wymore: no, I, I know, you know, you were mentioning that you had, you know, infl or, uh, homes are [00:08:00] appreciating and I think, you know, think back five, 10 plus years ago, there was a jumbo rate loan, and I don't know what those dollars were, but I feel like a lot of mortgages are already kind of creeping in just.

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

Jared Bahr: products right now are your government loans. That's where all your first time home buyers and anybody under like a loan [00:08:30] amount of 820,000 back when I got into the business in 2011, I want to say.

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

And so that's. Those are the guidelines that you, you typically see a lot. But now that we're talking about jumble mortgages, um, the government doesn't securitize those and they don't, they don't guarantee 'em. Right. So it's up to us banks to come out there or secondary market investors [00:09:15] to, to find solutions to, to, to fill that void.

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

Uh, and by doing so, we set our own cost of funds, right? And so [00:09:45] that gives us competitive edge against all these other outside lenders. Your rocking mortgage, the one spending all the money advertising. Um. We take that savings and we, we turn around and we lend it out on the, on the mortgage side to get better rates.

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

Ethan Hutcheson: That's nice. That's probably a huge benefit in working with a bank rather than a broker. You're not having a new login every three months to pay your [00:10:15] mortgage.

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

Jared Bahr: Correct. And those mortgages get sold to free up li liquidity for these other smaller online lenders so they can go provide more loans. Where we don't have that, we don't have that issue. We are, uh, artist [00:10:30] Bank is the largest held privately bank in the United States.

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

Jeb Graham: Well, very good. So, so here, here's, here's another question for you as far as like non-traditional lending options. So you've got, so we've got a lot of clients that are [00:10:45] business owners obviously, or self-employed people. We also have a lot of retirees that maybe don't show as much income as somebody that's working.

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

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

We get to decide who we wanna lend money to. We set our own underwriting [00:11:15] policies and guidelines on these products. So if we have a unique situation, say you have a gentleman that, or a generally that's got $5 million in the bank, right? But they're, they're retired and they just had it all sit with you and you set up a monthly distribution that fits their [00:11:30] lifestyle and they can survive on.

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

Other people aren't good in that situation. So we can kind of play with those numbers and find those financial needs and, and kind of tweak it so to speak. [00:12:00] So that, um, people can get into the house that they wanna ultimately get into. Um, another way is asset depletion. We can take a large chunk of assets and then we have a calculation that allows us to use that money as income without even taking it monthly [00:12:15] distribution, because ultimately you have a large chunk of assets sitting mayor that we can apply.

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

You know, a lot of people don't know that when you add depreciation on your tax returns, we get to add that back as income for us. [00:12:45] So the more depreciation you use to, to lessen your tax bill, you know, doesn't necessarily fetch your home buying power. 'cause we're gonna add that back in because. Ultimately that's a, you know, a tax lever to, to save you some money.

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

Eric Wymore: I didn't know that either. So, so are there, you know, I always see like a long list of do's and don'ts. Uh, yeah. When, when you're, when you're starting the mortgage process and the borrowing process, and maybe you can highlight some, you know, here's the certain things that you need to do [00:13:15] and here's a certain number of things that you, you do not want to do when you are in that mortgage borrowing process.

Ethan Hutcheson: Yeah. And if I could

Eric Wymore: add

Ethan Hutcheson: something to that, Eric, maybe like split it up a little bit. Like first time home buyers, right? You don't want to open a new credit card or go get an auto [00:13:30] loan, but, but same thing, same question for Eric that Eric asked, but what about your high net worth people? Do they don't sell your business this year or don't, don't offload a private equity investment, something to those things.

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

Jared Bahr: Yeah, a hundred percent. Uh, let's start that question with one of my favorite quotes from Jerry McGuire. Help me. Help you. Right. So, as your loan officer, um, it's my job to help you navigate these crazy guidelines and [00:14:00] policies that, that banks have.

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

Is where is your money coming from? Um, some dos and doses. Um, large deposits, mattress money. You know [00:14:30] it, any cash that we can't source is a big red flag because we don't know where it came from. And in the housing recession, a lot of these guidelines came about because people were going and getting secondary financing to get their primary financing, whether [00:14:45] that be short-term payday loans, loan sharks, anything of that nature.

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

And what came outta the housing recession is banks and lenders have gotta do a better due diligence of making sure that when we're putting you on a home [00:15:15] loan, you can afford that home loan. And that's with first time loan buyers, or that's with your media, uh, intermediate home buyers, or to your, your experienced home buyers that are looking for that, uh, that dream home that they've been, you know, looking at the Leewood magazine every week.

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

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

Disclaimer: Mm-hmm. I get

Jared Bahr: a lot of first time loan buyers that want to come buy a $750,000 house on. A 60, [00:16:00] $70,000 household income. And that's just not realistic because why you most likely have an 800, 900, uh, dollars a month car payment that's stepping into it, you know, and people think of their gross salary, and then when it comes to tax season and allowing that money goes away.[00:16:15]

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

Because that's gonna affect your debt to income ratios. Um, you know, [00:16:45] a more experienced home buyer, a person looking, you know, in that higher end, don't make any drastic changes to your businesses. Don't, don't go buy a new business right before your, your, you know, your wife's been telling you wanted to buy a house for six months, but two months before you buy that [00:17:00] house, you go buy a new business and you dump a bunch of your capital into it and you're kind of hamstring yourself there.

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

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

A little bit of a plug for what we can do for people when they're buying houses as well. So I'm assuming you [00:17:30] get, uh, a, a fair amount of scenarios where the closing dates don't line up. Meaning somebody's bought a house, they need to close on their new house before they sell their old house. They're depending upon the equity from their old house to purchase their new house.

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

[00:18:00] So we set up on his non IRA accounts. So we can only do this on trust accounts, uh, or non, non, whatever it is, non-retirement accounts. Um, and I set up a speed lock, right? So basically he, he was, I was able to send him $400,000. We didn't have to sell any of his [00:18:15] investments to generate capital gains. Uh, so basically it's just like a eloc.

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

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

Because people don't want try to be living in their house while they're trying to keep a show ready. 'cause it's, it's, it's [00:18:45] not fun selling and, and buying houses and then moving and everything, and you're trying to live in a house and you're also trying to keep it, you know, showroom ready, keep it clean and everything ready to go.

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

Um, so what we can do is what we call bridge loans or a heloc. I typically try to do a HELOC simply because they've already got primary mortgage, a heloc. I can get it done in a couple of days and [00:19:30] it's a lot cheaper. Process as far as not having very many fees, we're gonna tap into your equity. It's a short term loan, very similar to what you're, you can offer.

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

We're gonna take that with that leftover. We're gonna take that leftover equity. Apply it to the principal balance and if [00:20:00] they want what we can call it, it's called recasting or ream re amortizing, that conventional loan that they're on. What that simply means is if they had 800,000 left on that loan and then they took 400,000 from the house they just sold, we'll apply that [00:20:15] to the new loan that we just took out for them.

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

Gotcha.

Jeb Graham: Nice. That makes sense. Well, well, very good. I know we're getting, uh, kind of up to the time limit, but, uh, wanted to, [00:20:45] number one, thank you for coming on today. And also thank you. I know we've sent some clients over to you. You take very good care of 'em. We certainly appreciate, appreciate that and, uh, hopefully we can keep.

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

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

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

Disclaimer: right. It's there you go.

Jeb Graham: Well, well, very good.

Well, this has, uh, been a [00:21:15] productive 25 minutes or so. This is Metcalf Money Moments Podcast. Sign it off.

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

Disclaimer: Jeb Graham, Ethan Hutchinson and Eric Wymore are registered representatives with and securities offered through LPL Financial Member FINRA SI PC Investment advice offered through WCG Wealth Advisors, a registered investment advisor, W CG Wealth Advisors and Metcalf Partners Wealth Management is AR [00:22:00] separate entity entities from LPL Financial.

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