Many people think that the greatest expense they will have in their life is the purchase of a home. This is true, but more specific and to the point is the cost of the mortgage you must attain to buy your home. Thousands upon thousands of dollars can be quickly saved or lost with the smallest of oversights. Dave Porter, Sales Manager with loanDepot, has a saying which goes like this: “Don’t underestimate that which you don’t know.” With more than thirty-five year of experience in the industry, you can rest assured that Dave speaks from experience. In today’s interview, I speak with Dave about the gains and losses, failures, and victories that can occur when working with an experienced mortgage lender.
Dave, hello and welcome to LocalsGuide.
Thank you for the invitation – It’s nice to connect with the community. I appreciate what you are doing with LocalsGuide.
Dave, to begin with, will you please tell us a little bit about your background in the industry?
In the late 70’s, after a very short time as a public-school teacher, I started selling real estate. In 1982, when rates were at 17%+ for some unknown reason, I entered mortgage lending as a career. I’ve been in mortgage lending and the general real estate industry teaching lenders, appraisers, builders, and real estate agents for decades. I have held several roles in the industry from branch manager to regional manager to SVP of a builder business. Currently, I am a Sales Manager for loanDepot in Southern Oregon. I am licensed to do loans in OR, WA, CA, ID and AZ.
How did you get involved in mortgage lending and what have you found that you are particularly skilled in?
I liked real estate sales but if one deal went sideways, your entire income for the month could be in jeopardy. I found mortgage lending to be a little more balanced. The key still is to educate the buyer of the process and steps and share options. I like to think outside the box, and this has served me well. I like to refer to myself as a “solutionist” and the Mortgage Puzzle Master!
It’s like you are trying to solve for 4 and you say 2 X 2 or 3+1, sometimes you need to think 8-4=4 or 12/3s.
Dave, why did you choose to work with loanDepot? What were the benefits for you and your clients in working with this company?
After 38 years in lending, I could have worked anywhere. I like loanDepot because they have a wide range of products to help borrowers. They are the second-largest non-bank Mortgage Lender in the nation. They are very forwarding thinking on the use of tech and that can save a great deal of time. We offer great marketing tools for our Realtor and Builder Partners. We are looking to hire two experienced Loan Officers, an experienced Production Assistant, and an experienced Processor.
Dave, let’s talk about your favorite quote: “Don’t underestimate that which you do not know.” What does this exactly mean and how do you see it play out in your day-to-day life?
I guess it comes down to that there may be a solution that has not been realized. I recently had a couple who came to me and asked for the lowest rate I could offer. I shared some rates and the costs associated with the lower rates but then I asked how long they plan to keep the home, and they said 2 to 3 years. Buying down an interest rate was not in their best interest since it would take over 7 years to recapture the upfront point cost for that lower rate. By finding out how long they plan to keep the house, it was a critical factor in my ability to provide expert advice.
It must be hard to see some of the consequences that occur in your line of work. Are the choices we make always permanent?
I am a fan of people owning the home and not the home owning them. Back in 2007 & 2008 there was an amazing amount of greed and stupidity in the market. Many people got hurt. I’m an advocate of common sense and common-sense lending. I don’t just share how much a house payment will be, I’ll talk to clients about the total cost of owning a home. A house payment is not just what you pay the mortgage company. Is your house payment principal, interest, taxes and insurance? No! It also includes utilities and maintenance and even transportation cost. Let me explain; if you buy a 2020 Earth Advantage new energy-saving home with warranties and built to the new codes, that home will have less maintenance and utility costs than a similar-sized home that’s 15 years old. If you purchase a home 5 miles from work or the grocery store, that home is more location-efficient than having to drive 25 miles for that bag of chips!
Dave, can you give us an example of a strategy of mortgage financing?
I recently had a buyer who told the Realtor and I that he wanted to make a lower offer by $10,000. The market is hotter and there is a higher probability that the offer would not be accepted. When I asked the buyer why the lower offer, he told me he wanted the lower payment that resulted in that. That’s legit, I figured out that the payment would in fact be about $40 lower in his circumstance. Then I suggested an alternative path that provided the same result but made the offer to the seller more acceptable. By asking the seller to pay discount points to lower the rate, the payment was lower, yet the cost of the points was only $3300.
Dave, please talk about some aspects that you take great pride with in your work.
I like to use appropriate humor. This can be a stressful process and if everyone knows what the common goal is, we all win. If folks know what to expect, it helps. There is an amazing amount of paperwork required with a home loan.
In your day-to-day work, what is an overview of the types of services you are providing?
Purchase or Refinance. Conventional, VA, FHA, USDA, Jumbo, Renovation, Oregon Bond and many others.
What are your goals in working with your clients?
To understand their needs and provide a variety of options then help them implement the best option and deliver exceptional service.
Dave, are all the services you offer through loanDepot or through other companies?
We often close loans in our own name but when the situation warrants it, I can broker out a loan that might be a better choice for a borrower.
I am curious to hear what some of the biggest mistakes you see people making are.
You don’t have enough paper or ink. Making assumptions about what they can or can’t do when it comes to obtaining a home loan. “I only have a 640 score, I can’t buy” – not necessarily true. “I had a bankruptcy 5 years ago – I can’t buy” – not necessarily true. There are some programs that a borrower can’t obtain but there are others they would qualify for.
What types of clients work best with you?
Nice people who write nice reviews like these: https://www.zillow.com/lender-profile/DAVESPORTER/
What is the best advice you like to offer?
Two quotes come to mind: “Just because you can, doesn’t mean you should, and just because you should, doesn’t mean you can.” And the other one is “It’s a lot easier to get into trouble than to get out of it.”
Can you give us an example or two of how people can leverage their equity muscle?
Pat & Pat have owned their home for several years and are building strong equity. That equity can be flexed for them even more than it is now, if only they would let it. Let me elaborate.
(This is an example only. All information in the example below, including interest rates, payments, terms and availability are examples only. These rates and/or terms are not necessarily available. This article is provided for educational and informational purposes only. loanDepot.com, LLC does not provide legal, investment, accounting or tax advice, please consult a licensed attorney, financial planner, CPA or tax professional on these ‘tips’ and any information or opinions contained herein. Rates, terms, and availability of programs are subject to change without notice.)
Pat and Pat contacted me about a no cash-out refinance, what lenders call a “rate and term refinance.” Their home is valued at $500,000 and they owe $300,000. The original loan was for $350,000. Their current rate is 4.250%/ APR 4.435% and their payment (before taxes and insurance) is $1,715.
In this example, for a no cash-out refinance—assuming they have excellent credit—the rate on a 30-year conventional loan would be 2.875%/APR 2.915% and their monthly payment would decrease to $1,245. There is no mortgage insurance. Payments are for principal and interest only and do not include property taxes, insurance, HOA or other fees that may be required. Subject to qualification. Loan limits may apply. Interest rates and APRs valid through 08/10/2020. They could pay cash for the closing costs or add them onto the loan, increasing the payment marginally by another $22 per month.
Pat and Pat asked me what else they should be considering about a possible refinance. That was a smart question! One idea is to explore the 15-year term option.
The rate on a 15-year conventional loan would be 2.626%/APR of 2.714 % and that payment would increase to $2,018 (again before taxes and insurance), about $300 more per month.
Payments are for principal and interest only and do not include property taxes, insurance, HOA or other fees that may be required. Subject to qualification. Loan limits may apply.
Again, no mortgage insurance costs are required. However, the interest amount paid out over the term of the new 30-year loan would be about $148,000 while the interest paid out over the term of a new 15-year loan would only be about $62,000—about $86,000 in interest savings. That is significant!
But Pat and Pat asked me another question: “What if we exercise some of our equity to buy other real estate? Could that make sense?”
So, we ran some numbers. We took the $300,000 owing and added $60,000 onto that amount and ran the 30-year payment schedule. The $60,000 could potentially be used to pay the closing costs and down payment of a rental home priced at $250,000. Since the loan is a cash-out refinance the rate on a 30-year conventional loan would be the rate is slightly higher—in this example 3.125% /APR of 3.155%—the payment would be $1,542 per month. Payments are for principal and interest only and do not include property taxes, insurance, HOA or other fees that may be required. Subject to qualification. Loan limits may apply. Interest rates and APRs valid through 08/10/2020.
Example based on a 30 year non owner-occupied conventional mortgage. Purchase Price: $250,000 with down Payment of 50,000. This loan has no mortgage insurance costs. Interest Rate: 4.125%. APR: 4.415%. Payments are for principal and interest only and do not include property taxes, insurance, HOA or other fees that may be required. Subject to qualification. Loan limits may apply. Interest rates and APRs valid through 08/10/2020. The payment (before taxes and insurance) would be $969 per month. According to local statistics, the fair market rent would more than cover the total payment with taxes and insurance.
So, let’s recap. Pat and Pat have other options available to them. They could refinance their home, lower their monthly payment by $173, invest in a rental home, or build equity by shortening the term on their mortgage as well as by appreciation. According to MBS Highway, a national data resource, the anticipated appreciation and equity pay-down could potentially yield over $190,000 in equity in a 10-year window and that’s just on the rental. They will gain equity reduction and appreciation from both properties!
So why do these numbers work so well? Because the rates are amazingly low! Is it time for you to flex your equity muscle?
Dave, can you talk more and give examples about working with an experienced lender versus an inexperienced mortgage lender?
Realtors and sellers when looking at offers, look at who the buyer is working with on lending. If that lender is local and has a great reputation for closing on time, then the odds improve that the seller will accept that offer over a preapproval from an online source or unknown or out of area bank for instance.
What do you like doing in your free time?
This year I discovered gardening and I am hooked. There is a real joy in eating a tomato or onion that you grew yourself. I enjoy spending time with my wife of 42 years, we are still very connected with our 4 adult children and now have three grandchildren, all living in the Rogue Valley.
What do you enjoy most about the work you do?
It’s hard to beat the look on the face of a first-time homebuyer getting the keys to their new home, but I’d say overall the satisfaction of doing good for others. Helping them save money and build equity.
Dave, can you share a real life success story that may hit home with many readers?
Martha bought her first house with 3% down 3 years ago. Next month she will be able to put over $100,000 into savings from the sale of it. This will help her buy a new place and allow her and her husband, who are expecting their 1st child, to live more comfortably and she will not have to return to work immediately. That’s a nice outcome.
Finally, what is the best way for any of our readers to contact you and to learn more about your services?
I’m a bit of a workaholic so I find myself available early evenings and most weekends. You can reach me on my cell at (206) 304-8228, or my office line which is forwarded to me at (541) 708-4020. Or send me an email at email@example.com.
This information is not intended to be an indication of loan qualification, loan approval or commitment to lend. Loans are subject to credit and property approval. Other limitations apply. Rates, terms and availability of programs are subject to change without notice. State disclaimer: loanDepot.com, LLC NMLS ID 174457. www.nmlsconsumeraccess.org Licensed by the OR Division of Finance and Corporate Securities, Mortgage Lending ML-4972.| WA: Licensed by the WA State Department of Financial Institutions, Consumer Loan Company CL-174457. | ID | CA: Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act CRMLA 4131040