Posted Thursday, May 2nd, 2024 by Enterprise Property Management
Trustmark Bank’s Top Loan Originator, Ray Rosas, a seasoned mortgage loan originator, joins us to explain complex mortgage processes and offers strategic advice for both novice and veteran investors. With over four decades of experience, Ray offers invaluable advice on navigating a multitude of mortgage scenarios, from HELOCs, conventional loans, to investment properties. This episode is packed with strategies for both first-time buyers and seasoned investors to guide you through the intricacies of mortgage planning and execution.
Aaron
0:00:19 – Thank you for joining us on the Behind the Curtain Podcast. Today we’re going to be speaking with Ray Rosas, a loan originator and all-around guru about mortgages. And he’s gonna tell us what we need to know about the market today and give us important information about how to be a success. Behind the Curtain Real Estate Podcast
Sponsorship
0:00:49 – Behind the Curtain Real Estate Podcast is sponsored by Memphis Real Estate Advisors. Memphis Real Estate Advisors is a realtor team led by husband and wife duo, Aaron and Alyssa Ivey. Bringing over 20 years of experience in both residential and commercial real estate sales and property management, the team works with investors, buyers, and sellers as a member branch office of the national franchise, EXP Realty. To get in contact with Memphis Real Estate Advisors, visit them online at memphisreadvisors.com or call 901-671-1015.
Richard
0:01:19 – Well good morning Ray. It’s great to have you on the podcast today.
Ray
0:01:22 – Thanks for having me. Good to see you guys today.
Aaron
0:01:24 – Yeah, I’m glad you’re here. You’re actually in the studio.
Ray
0:01:26 – I know. It’s the first time for everything. I can’t believe it took 67 years to get here.
Richard
0:01:32 – So for my benefit and for the listeners’ benefit, just tell us who you are and who you work with.
Ray
0:01:37 – My name is Ray Rosas. I’m a mortgage loan originator for Trustmark Bank here in Memphis. Just a little legal jargon, my NMLS license number is 771223 and we are equal housing lenders at Trustmark Bank. So I’ve been working with Trustmark for about five years now. Overall, time in the mortgage business is approaching 40 years. And pretty much I’ve done origination the whole time. There have been a few other management type things thrown in between, but basically what I do is help somebody get a home loan.
Aaron
0:02:13 – For the listener, Ray has probably closed on at least five loans for us between full range of products really. Like we’ve had the traditional mortgage on a couple of houses. We’ve had at least one refinance. We’ve had a HELOC and a home equity line of credit on a property that acted as a bridge loan for us between you know one house to the other. So I just want to assure the listener right off the bat that Ray absolutely knows what he’s doing and one of the things that I like the most about Ray is that he will say no if he thinks that an idea that I have is not something that can be accomplished in the current market. He will let me know that there are going to be challenges to that. So you know at Enterprise we like to say yes as often as possible, but when you’re working with a lender, they need to have the capacity to say no or to talk about your ambitions and talk about how there may be challenges. So Ray’s actually never said no to me, I need to clarify that, but he has said, I don’t know that that’s the right direction or I don’t know that that’s going to accomplish your goals. So that’s the kind of partnership we need when we’re investing in real estate and when we’re considering expanding our portfolios or even pulling money out of that portfolio to do other things. So that’s a great thing about Ray.
Richard
0:03:25 – If you could tell us the type of customers you typically work with and the loan products that you’re giving them, you know, maybe you’ve got some anecdotes that you could share.
Ray
0:03:35 – Typically, as a rule in this business, when you start, most of your referrals come from realtor clients because they have the buyers, the people trying to get the financing. As you get more established and you get a customer database, then you start getting referrals from past customers. I’ve done grandparents, kids, grandkids, and now I’m some great grandkids over the years. So basically, most of the time, my typical client is a owner-occupied buyer. That could be a first-time homebuyer, it could be a last-time homebuyer, a move-up homebuyer, and the way that we determine how we’re going to help that individual is to have a conversation and really get a loan application going. And then at that point in time, you can know what options are really available and discuss those with your client and make sure that what fits them is the best thing for them at the end of the day. So if you came to me or called me today and said you wanted to buy an investment property, I would basically give you some information about down payment options, payment information, closing cost information, how the process works, and then to ultimately determine whether the cash, I could give you numbers on cash flow or what the payments would be, to ultimately determine whether it works for you and for us as well is we would have to do a loan application. And generally in this day and age most of them are done online secure, not necessarily. I can take the information over the phone or we can set up an appointment to meet face-to-face. With the investors that I’ve dealt with, generally it’s online. With a first time home buyer, I tend to insist on face to face meeting, although a lot of people don’t want to do that, but it’s the best way to sort of walk them or ease them into a process that they’re not familiar with.
Aaron
0:05:30 – Yeah, I definitely have to agree with the face to face. It was very comforting for my wife and me as we were trying to get into Germantown about 14, 15 years ago. We needed the comfort of being able to sit down with you. We know where your office is. We would often surprise you with visits if we just happened to be nearby and I looked out there and saw your car, I’d be like, oh, Ray’s there. I’m just going to swing in and talk to him face to face. And Ray is so easy to speak to either on the phone or in person, and it’s so comforting to be able to talk to you and you have already established the pace that the Loan process is going to have and so once you establish that pace for a first-time homebuyer You know face to face We have followed that path and we’ve we’ve followed those steps and if we ever get lost in the process We just give you a call and you let us know what we need to do next So Ray is one of these people that has everybody’s loan like listed out in his computer. And so he’s able to pull up not only the current loan application, but also old loan applications and old loans. He’s got access to a ton of historic data. He can tell you about the house that you’re interested in purchasing. He can tell you what past loans have been. He can tell you about just about everything that you would need to know regarding lending on any particular house. So it’s been great.
Richard
0:06:51 – One of the things you mentioned in what you just said was offering information about down payments. Are you suggesting that you’ve got programs that can be down payment assistance?
Ray
0:07:02 – Yeah. So depending on whether you are, if you’re trying to be an investor in our world, it’s a pretty cut and dry. You could do as little as 10% down. The rates are punitive on that. 20% is the magical without PMI private mortgage insurance and then 25% is sort of the down payment that gets you the best rate combination lowest of fees. Now if you’re buying a primary residence and you haven’t bought a house before, there’s so many products available, down payment assistance products. We have some lender paid closing costs in certain areas, majority-minority census tracts, we have some grants that fit into those. Not one product fits everybody, and a lot of it will have to do with the credit score, and a lot of it will have to do with what your income is and what your debt ratio is going to be. So with anybody that’s not really sure, whether even you’re a move-up buyer, the real thing that you have to start with is an application. And it doesn’t cost anything. Credit reports are $91 now. They’ve more than tripled in the last three years. That’s for a joint credit report. So we do that for nothing on the front end. Of course, we do collect for it when we close. So if for some reason we can’t do anything, and like Aaron said, I’m going to let you know, I can try to give you an idea of what you can work on, but I’m not a credit counselor. So basically, you just make the application. We’ve already talked a little bit about what your needs are, where you want to live, or how much money you have, and then I can say these products apply. That being said, first-time homebuyer loan programs are not necessarily the best programs out there if you, the main thing they accomplish is help with down payment. The terms of the loan are sometimes punitive. The restrictions on the house going forward, you may not be able to rent the house out. A very common loan used is THDA. It’s been around as long as I’ve been in this business. And you cannot rent the house out. Let’s just say you’re a first-time homebuyer and you’ve been married for a year. And in four years, you’re not happy with your marriage and you’ve got to sell the house. You could conceivably pay some money to IRS. There’s a bunch of guidelines and I think my goal is to make sure you understand all that but not overwhelm you with details that really would just make you stay up at night.
Aaron
0:09:48 – With those first-time homebuyer loans, it does make sense that the bank is taking on more risk, I would assume.
Ray
0:09:55 – Well I would say this, is that any loan that we have, and the right way that it is mitigated if it’s FHA is tied in with a lot of those programs. So basically what an FHA loan does is if we generate a loan to FHA that meets their criteria, they insure it. So they insure against default. Now we don’t lose the principal, we will never lose the principal on that loan. That’s why you put upfront mortgage insurance into a pool. That’s why you pay monthly mortgage insurance. So for the 95% of the people that always pay their FHA mortgages on time, the other 5% that didn’t, all that money helps offset any losses that an investor would have. And when I say investor, whoever holds the paper on the loan. We’re just a servicer. So end of the day, that’s why you can do 3.5% down loans. If it didn’t exist before all of these programs, you had to have 20% down to do a loan. So it’s been a long time ago since that was the case.
Aaron
0:11:03 – So we’ve been talking a lot about first-time home buyer loans. We’re talking about owner, occupant loans, you know, people that want to live in the house that they’re being funded by your bank. What about investor loans? Can you tell us specifically with Trustmark, what kind of investor loans you’ve seen come out of your bank?
Ray
0:11:19 – So basically we adhere to Fannie Mae and Freddie Mac guidelines. So there are limitations to the number of homes that you can have financed. You can do as little as 10% down and then basically your interest rate is determined by your credit score, is determined by your down payment amount. I have not done a 10% down investment property loan ever. The PMI is punitive on it and the fees are punitive on it and most people to be honest with you probably wouldn’t like the cash flow situation anyway. That would be more of a question for you to answer than it would be for me. So what I see typically is 20% down and the good thing about an investor loan is that we can use the fair market rental on the appraisal to offset the payment. So what happens there basically is let’s just say that you had a $1000 payment on the house and the appraiser prepared a rent schedule that says that market rent, so therefore it eliminates that being into your debt ratio. Now you would still have to qualify based on your other debts to qualify for the house, but in most cases that’s how it works. It’s just sort of a washout, so that eliminates that. So if you’ve got somebody that’s fairly close to being maxed out on their debt ratio, you could still probably do the investment property loan because you wouldn’t have to count any of the payment on the new house against them.
Aaron
0:12:53 – So you had mentioned credit scores as a determining factor of the rate that you get on that particular loan. Do the Trustmark loans give you the option of buying down points?
Ray
0:13:03 – You can pay points and you’ll find on most investment property loans and I would say most places as well, there are going to be points on it anyway, especially if you put 20% down. There’s no 0.0 origination, which is what you normally would like to do if you’re buying a primary residence, keep your cash out of pocket to a minimum. We do allow it to buy down. I always just do the scenario. If you paid two points, it probably would get you about a percent in rate. So if it’s a $200,000 loan, that’s $4,000. How many months does it take you to break even for paying those points? Almost 95% of the time, the math does not work. You’re better off hanging on to your cash, especially if you’re new at the investment property thing or if you’re going to be purchasing more houses. My goal would be to get in for the least amount that you possibly could because you need that cash build up for unexpected expenses and things like that.
Richard
0:14:04 – Now for investors that need to make the transaction happen quickly, are these loans suitable for that? Can they close quickly or do you have other options that would be better to close quickly and then refinance?
Ray
0:14:18 – Okay so the thing about a refinance the loan is going to have to be seasoned okay so there’s a couple guidelines on that and off the top of my head, if it’s cash out, that’s longer than if it’s not cash out. So I won’t go into all the details of that. Typically, from start to finish, it’s about a 30 day thing. And that’s just traditional. I mean, in this market right now, we’re not as busy. The appraisers are not as busy. So we are seeing appraisals come back in four and five days where we were almost a month during COVID. So at the end of the day, it’s the individual’s willingness to provide the documentation that’s required has as much to do with how quick we can turn it around as our capacity does.
Richard
0:15:03 – Do you do anything along the lines of a loan for someone who wants to go in, rehab a property, and then reappraise with ARV?
Ray
0:15:11 – It really would depend on the size of the project. We don’t have a product like that now. There are products out there. They’re talking about bringing it on. It’d be one of those things in my situation to where I would wait and see if somebody else could actually close one before I’d go out and say that we’ve got this new product. A couple of sources are equity in your own house. Aaron spoke briefly about a home equity line. So some of the investors that I’ve dealt with over the years, especially startup investors, have large equity positions in their house. You can either take a home equity line, which is zero closing costs, use that to help you with your down payment. It can be borrowed if it’s secured. It cannot be borrowed otherwise. And you can use that for your down payment. And then if you’re just talking about a flip, and I know this is more long-term thing, that’s really the way to go because we don’t have any interim financing for that. But as far as short-term bank product in our world, we don’t put any investment properties on our portfolio. It’s only something that we can sell in the secondary marketplace.
Richard
0:16:21 – Let’s talk about exit strategy a little bit. As a first-time buyer or as an investor, what are prepayment penalties going to look like on the loans?
Ray
0:16:31 – We carry no products with prepayment penalties and you know after the great recession and the stated income loans and bank account income loans, the federal government has pretty much put all those to rest. Now there are still some out there, we carry no interest only loans, no negative amortization loans. Those are all buzzwords from the past. And they’ll find their way back in, and then we’ll have another little crisis, and they’ll find their way back out. But as far as just wanting to move to a next house, if you’re an individual, I always suggest that you have a home equity line on your house, even if you don’t owe anything on it. They don’t cost anything if you don’t use them. And it’s a quick way to access your money if that house that you really gotta have and you got multiple offers and you’ve gotta have that house and you qualify for your current situation to buy that house, it’s a quick way to get your money. It’s just like having your equity in your hand before you go to closing.
Aaron
0:17:34 – Yeah, and that’s exactly what our experience was with our home equity. I think we had a, do we have a line or a loan? Do you remember?
Ray
0:17:41 – You had a line.
Aaron
0:17:42 – We had a line. Had a line. So with our home equity line, here’s how we used it. We had a home that we owned in Germantown for about 11 years, and this was back in 22. And we found a house that is actually a house that so many people that live in Germantown drive past all the time. It’s kind of a little bit of a landmark, which we’re very proud of. It’s just, it’s cute, it’s a Victorian house, and it’s on a very main street. So we needed that money out of our home equity line, not only to get our home ready, but also to have a down payment on our next house. And so Ray was able to help us do both of those things. And here’s the most amazing thing. We took out a reasonable limit, a reasonable amount in that loan, and we used all of it. We didn’t use more or less than what we had discussed. So Ray actually helped set the expectations for how that line of credit was to be used. He’s got a banker there. So the young lady that I worked with was just so nice, so helpful, so intelligent and every question that I had she was able to answer because believe it or not, listener, I’m a little bit of a novice when it comes to lending. We see a lot. I’ve managed thousands of houses. I’ve worked with thousands of investors, but I myself am more of an entrepreneur. I’m focused on the business. I’m focused on management. That’s kind of my focus. So lending, I always refer out to a lender like Ray, and I always refer Ray, especially to local people, and I would like for you to do more investor loans with us because I feel like Trustmark is just a fantastic bank, great communication, and people get the answers they need as soon as they need them. So yeah, we’ve had a great experience there.
Richard
0:19:21 – Just one thing that came to mind as you were talking there about communication is where does customer service go after the loan is closed? How many different channels do I have to communicate?
Ray
0:19:32 – Well that’s a good question and just a brief history of when I started in the business, you got your mortgage from a mortgage company and you paid your mortgage to that mortgage company and your customer service was with that mortgage company. That transitioned through the years to where the market is now, which is most mortgages are sold. They’re a piece of paper or a commodity. It’s called a mortgage-backed security. So even though you pay your payment to Trustmark or whoever, they’re not earning interest. They’re being paid to service that loan. So the person that bought your Ginnie Mae or Fannie Mae security, that interest goes to them, investors, and many of those are institutional funds. So one of the reasons why I came to Trustmark as I wind down my career, not anytime soon, good Lord willing, they keep their loans. They retain the servicing on their loans. So the last bank I worked for kept all their conventional loans, which is a bonus for me, keeps me in touch with my clients, and it’s a bonus for my clients because it keeps me in touch with what’s going on in their loan world. So we were bought out, very common in the banking industry. We were bought out. The new bank came in. They sold all the loans. In fact, the building that I’m sitting in talking to Aaron, we own this building, it’s the last at Magna, and then when Pinnacle bought them out, they sold the building. That’s when he stepped in and bought this building. So bottom line is, we have an 800 number, you can call it. It’s fully automated servicing. If you’re comfortable with, you know, doing things online, you know, I’m sort of old school. People will call me, I’ll take care of it for them. Even though most of the time it could be accomplished somewhere else, it’s usually just an easy little information for me and it just puts you in a place where a common thing would be an escrow analysis every year. Taxes go up, insurance goes up, payment goes up, and invariably they come out basically around the same time of the year, and I know that I’m going to get a bevy of calls. But I take the time to explain to each one of them, whereas they would probably be on hold for a while on the 800 number, whether it be an ARC bank or any other bank or mortgage company that had purchased the loan.
Aaron
0:21:54 – Can I talk about the terms of the loans that Trustmark offers? So we had talked earlier, actually right before the podcast about arms and adjustable rate mortgages or variable rates and it sounded like That’s not something that Trustmark really does a lot of well
Ray
0:22:10 – I mean it depends on I mean we still do them we have 10-year arms Seven-year arms which basically means they’re fixed for the first number whatever that number is and then they become adjustable on various situations The key is what is the advantage to doing that over a fixed rate? The advantage right now is slim. If you would have backtracked with us when rates started going up, we had a healthy appetite, owner-occupied only, for arm products. Well, actually, we did investors, too. So we were very competitive, more than competitive in the marketplace, and they got their fill. So it’s the bank that wants a certain amount of money on their balance sheet, so that’s not a loan that they’re selling in the secondary market. Now we’re getting some prepayment on that kind of stuff because people sell, they move, whatever, so the appetite might come back. But I would say across the industry, you probably have an exception here and there. I’m quoting a 10-year arm for somebody today, this is an owner occupied, and they have perfect credit, and they will save about three-eighths of a percent of the rate. So we were a percent and a half under the fixed rates when we were in the go-go world, and believe you me, when you’ve got the product, you sell it. And if you know that you’re only going to be in the house for 10 years, what’s three-eighths of a percent and you borrow half a million dollars? That’s a pretty substantial amount of interest saved over that 10-year period. I do a lot of football coaches. I’m very tied in with the University of Memphis. They have short shelf lives. So basically, almost every one of the football coaches that I do a loan for, they do an arm product. The athletic director just left. I did his loan for him. We did a 10-year arm. Well, he was here for four years. So it’s one of those things that it’s case by case. So in the investment property world, you’re going to get a better rate on a fixed at our bank than you would on an arm product right now.
Aaron
0:24:12 – Yeah. And again, for the listener, my calls or emails to Ray are probably to the tune of about once a month. And Ray has always communicated information and experience that he has with me. I’ll often talk about questions that I receive from investors and they’ll say, well I want this product, I want that product. And so the very first thing I do is I go to Ray and I say, do you offer this product? And what I often hear back from Ray is, we don’t offer that product and we wouldn’t offer that product because we don’t think that it meets the investor’s needs. It doesn’t help them achieve their goals. And so it’s good to have a lender that’s going to say those things. Ray had mentioned previously the length of his career. He’s got no reason to do anything but tell the truth, make sure that you’ve got a phenomenal loan that’s gonna accomplish what you’re looking to do. And then there also have been times when I’ve spoken to Ray and I’ve said, these are my goals, and Ray has said, I don’t think that’s a good idea. And the funniest thing, this just happened in the last 60 days, I said, well, I’m going to call around. So I started calling around to a couple of other lenders that may seem like a flash in the pan. These are young people and they’re dealing with creative products. And those products work for some people. They really work for people who have like 50% down. And they’ve got the equity. They’ve got the cash. They put 50% down. And they’re able to really take advantage of some of these other loan products that are out there because they’re growing their portfolio. And so they’re trying to think around how do I get around this traditional loan. They eventually want that traditional loan. They want to refi into that. But one of the things that Ray said to me is if you keep playing the refi game on the flip process or the, you know, the burr process, what happens is you’ll end up paying a lot in closing costs. I mean a ton. And he, so we talked through a couple of scenarios and he said, Aaron, you’re gonna end up paying six, eight, $10,000 in closing costs, that’s not worth it. That’s not a good loan. So having that familiarity, you know, with the loans that Trustmark offers, but then also the courage and the boldness to be able to talk to the consumer and say, I really don’t think that this is gonna work for you. That’s one of the reasons that I really prize working with you.
Ray
0:26:25 – Well, basically on that end of it, I mean, you gotta know what your cost is. And so if you’re trying to access eighty thousand dollars worth of equity in a property and it’s going to cost you eight thousand dollars, that’s a lot of money to get eighty thousand dollars out of a property. Now, you don’t see it not going in your pocket. You see it not going in your pocket, but it’s in the loan amount. But when you fast forward five years, that’s when you pay it back. You pay it back because you’ve rolled it into that loan So if it’s if it’s what you need and you’ve got to have it then that’s the cost that it is But you know, I’m gonna tell pretty much nine out of ten people That’s not smart. It’s not financially smart to do this.
Aaron
0:27:09 – We’re coming to the end of our time today before we go I would be kicking myself if you left this room and didn’t give your opinion about interest rates, where we are now, and in all of your experience applied to today, where you see us going. Listener, this is not a guarantee on any level. These are rough estimates. Ray is not, he doesn’t have a crystal ball. It’s pretty close, but he can’t tell the future. So this is, I just want to know what you feel about where we are now, the nature of the current interest rates that we’re seeing, whether or not it’s good or bad, and then where we’re going, and then the general time frame.
Ray
0:27:47 – And then as far as locking in, you know, most deals are happening in 30 days. I don’t play the market. I will tell you, I suggest you lock it in. You tell me yes, you tell me no. You tell me no, it’s on you. I will let you know when it changes, but I can’t manage a pipeline for you or the market because I don’t really knowIt’s pretty easy. Right now, we’ve seen a pretty big uptick over the past month. There was anticipation of the Federal Reserve cutting rates. Just because they cut rates doesn’t necessarily always push into the mortgage side, but there is some tie-in. So everybody that already priced in that we’re going to have a rate cut in March, which didn’t happen, one in June, which didn’t happen, and probably not going to be one for the rest of the year. So we’ve reversed a little bit. So on your 30-year fixed rate loans right now, this is owner-occupied, and it’ll depend on credit scores. we’re probably around 7.375, locked 6.875 a few times 40 days ago. So it’s a half a percent increase in the rates. Where they’re going short-term, I think the market’s fairly vibrant. What I see is the customer has finally gotten over the shock that 3.5% rates didn’t always exist forever. We’re seeing some activity. I couldn’t predict what they were going to do or I probably wouldn’t be sitting here. I’d be sitting on the beach somewhere with all the money I’d made from that over the years. But I would say they’re going to stay in this range for the rest of the year. And don’t buy a house banking on the opportunity that you think you’re going to see a 3.5% mortgage to refinance on somewhere down the road. You may very well, but you may never. And so you’ve got to be prepared to say, this is the payment that I am comfortable with if I never get a refinance opportunity. what’s going to happen and really nobody does.
Aaron
0:29:44 – Okay, I think that’s an excellent assessment. Thank you so much for coming on with us today. I really appreciate it. And how can people get in touch with you?
Ray
0:29:53 – The best way is just to call me. My numbers are 901-309-6225. That’s my office direct line and you can leave a message on that or you can email me a rayrosas@trustmark.com.
Aaron
0:30:11 – Fantastic.
Richard
0:30:12 – We’ll put all your contact details in the show notes as well so anybody listening if you want to get in touch with Ray just go to the show notes and you’ll be able to find his contact details there as well. Well thanks very much for coming on Ray, it’s been great talking to you.
Ray
0:30:25 – Thanks guys.
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