Doug Smaldino Says Stop Procrastinating, Buy That Home Now!

My guest Doug Smaldino is the owner of Hillhurst Mortgage located in Los Feliz California. I purchased my home with the help of Doug and and his awesome team at Hillhurst Mortgage back in October 2022.

Doug has a message for all first time home buyers!

Stop Procrastinating and buy a home now!

Don't worry about the rates so much just focus on getting your foot in the door of that house you have always wanted. Once your in you can always refinance to a lower rate when that time arrives as it always does. Call Doug and ask about the tax shelter you will get after you buy your home, after Doug helps you put this in perspective you will be happy you did.

Douglas M. Smaldino, CPA | Senior Mortgage Loan Officer
NMLS# 340464 | Cal DRE# 01149672 | FL # LO63047
O (323) 522-1020 | D (323) 522-1040 | C (323) 707-3200 | F (323) 522-1030

https://hillhurstmortgage.com/

1662 Hillhurst Avenue, Suite A | Los Angeles, CA 90027
5535 S. Williamson Blvd., Suite 725 | Port Orange, FL 32128

Transcript

John Laforme: 0:00

Buying a home. Don't panic. Just listen to the rest of this podcast. Hey, everybody, I'm here with Doug Smaldino. CPA, correct? Yes, sir. All right. And senior mortgage loan officer and the owner of hillhurst mortgage. Yes. So up until a few minutes ago, I referred to you as the voice, because I only talked to you on the phone, and I never met you before. But you're actually the guy who got me the loan from my house. Yes. And that was bumpy. That was rough. It was scary. And I panicked a few times. And you know, the name of the show was buying a home, don't panic. But I actually panicked during my loan process and think because I remember the interest rates were just one day it's at like 775, then I think it jumped. No, no, not 776755. Yeah. And then it jumped up to like seven to five, and it pushed me out of qualifying. I remember that. Oh, my God that freaked me out. There was a rocky time and it's been a rocky time, even since then. Yeah. So you're here to fill us all in on that stuff. And

Doug Smaldino: 1:13

your your business is located in Las Vegas. Hiller's bargains are on Hillcrest Avenue, right over in the heart of Las villas near the Greek theater and observatory. So yeah, by the way, I've got the Greek tomorrow night, I'm going to see John Stuart, who should be fun. Amazing. So all right. So what is the pulse of what's going on right now with with, you know, these crazy rates, and people wanting to buy houses? Tell me about it? Well, that's exactly the crux of it, John. I mean, you know, even when you bought this house, I mean, you it took you a minute to find the one. And there was multiple offers. You weren't the only offer when you put your offer in on this. No, no, no, it was no, it was the only offer you were the only offer. Okay, on this on this house. I guess you got lucky you got lucky then because that is so rare in the market. It's not uncommon, by the way to see 3040 offers on house even now higher interest rates. Yeah, so the pulse is this is that we have really high interest rates. And we have really high home prices, right. And we have a very tight inventory. And that's the situation, it's really hard because there's limited inventory prices are high, interest rates are high. And there's a lot of people on the fence that are not only waiting to jump in, but there's already people that are making offers in the market. So it's really tough to buy right now. But qualifying, but let's talk about qualifying. Qualifying is harder, because like this house we closed about a year ago right now this year and a half, a little over a year and a half a year and a half since November two years. So this house is definitely is a good case study. Actually, John, because when you bought this house, this house is probably 10 12% higher than when you bought it, but the market value. So if you did the right thing, right, you didn't wait most people on this whole idea of waiting. And I don't know what the whole thing of wait is? Yeah. Well, it's worse, it would be harder for you to buy today than it was a year and a half ago. All right. Let me let me jump in and say this on that note, because people are waiting. So I was one of those guys that was waiting a couple years earlier, because I noticed the price house house prices started going up and understand as a home inspector. I'm in these houses every day. Yeah, I'm seeing what people are buying. And I'm like going, oh my god, they're not really going to pay that for this. Are they? These houses were so bad. I mean, they had so they needed so much work. Yeah, some like there's no way this can be sustainable. So in my head, I'm like, Oh, this will change eventually, like this will stop or reverse itself. And next year, the following year, it's the same thing. I'm like, What's going on here? And then previous to buying this house, I rent it for 12 years. I gotta be honest with you. I was actually pretty happy with it. Until about the 11th year is when I started my timer and my inner timer started going off going you know what? I think I need to find a house. Yeah, I just someone just told me to do it. And then I always wanted to be in this neighborhood. And so I was looking talk to Kevin Brennan that you and I both know thanks. And I said hey check out this house because there's no For Sale sign out front but it says is for sale online. So let me know if it's for real sure enough. Wow. House is already on the market for a couple three weeks and and there's really no activity and I think was because I only have one bathroom. Yeah, well that you know, that's a concern with that's how that's a real thing. Yeah, good for you. You did it. My but the point is that like, you know, John, it's like he did get in that's thing, ya know? Yeah, I guess thing is I try to tell people like, you know, I'm a CPA industry to a lender and I have a lot more knowledge than your average lender, or as you know, because I can merge the tax and tax discipline and more You've just shared together. But you know, when people when you look at the tax benefits, they're staggering, you know, just to name a few the mortgage interest on the loan tax deductible to the extent of $750,000. Going up to a million dollars, actually reverting back $2 million in January 1 2026. Some interest on 750 currently deductible interest on on a million dollars will be deductible in 2026. Then you have, you know, the big wealth builder, the big one, here's the this is this may not be the biggest for this$250,000 or $500,000, tax exempt free. Notice I say tax free not tax deferred on the sale when you sell the house, like you bought, you know, wherever you paid for this house, right? If you make $250,000. That's net of closing costs and improvements and all that. Still there's a 20 $50,000 gain you Pay Zero Taxes. Really, yeah. And for for taxpayers, that are in clients that are married, that exemption goes to $500,000 As long as you live in two of the most recent five years. So take the sale, they do a look back and five year look back, say oh yeah, I lived in a year, you know, year one in year three or year two and year four. It doesn't have to be consecutive. Okay. Any two years? You're golden. That's it. That's it. That's a mega wealth builder. Yeah, no tax, no tax would be on a 500,000 on a capital gain. It'd be pushing$200,000. But zero. Only in real estate to get these. These amazing. It's just it's just a, it's the mecca of investing. You need to have an off camera counting accounting class tech, they got to talk about what I'm doing here.

John Laforme: 6:45

Yeah. So. Okay, so interest rates are the big scare. Okay, so I'm a believer of, don't worry about the rate, get the house you want. And refi later, I think that's a very sustainable way of looking at it and a very easy way to understand it. But people are afraid I can't get into that I'm gonna have to pay too much. Abby can always drop that later, right? Wrenches rates are always gonna go up and down. Always. Always. It's history. Right? Right.

Doug Smaldino: 7:16

And then we think about we like, okay, I get it, I would say during, during COVID. Okay. Interest rates were artificially low. Okay, to 3%. It's crazy. But right now, interest rates are artificially high. Okay. Now, when you face when the rates really start moving up, they started moving up, let's call it January 2022. Right. So they started moving up slowly, but surely, up and 22, up and 23. And here we are in 24, we're only two years and four months into the cycle. That's nothing. It's a good way looking at nothing. Cycles normally go for some good perspective for five years. So, you know, when I sit here, and people are crying about interest rates to go, you know, are we today, they said, Oh, we still have a long way to go. Where they're going to these rates can be high for a while. Of course they are. It's a cycle, you know, I would say at least, we're not gonna see rates come down for at least a year, I mean, dramatically, we're gonna see a little downward pressure on rates, we might get into the mid sixes. But if we're gonna break below six, get into the fives, not for not till 2025 ish, mid 2025 ish, you know, maybe right, closer to a good question

John Laforme: 8:28

for you. I mean, I can ask you this as a homeowner. So right now, I'm at 6.25. The loan? That's the loan, you got me. Now, when at what point? How far should I wait for a drop to make it worthwhile to refinance? Well,

Doug Smaldino: 8:44

look, when you refinance, there's, you have to look at two things, the drop in the rate and the cost, you know, you don't want to spend 10 grand to save 100 bucks a month, you know, right, right. So we have to look at what makes the most sense. Generally, I'm a big believer in no cost loans. In other words, we the lender pays the closing costs for you. And if we could drop your rate, let's say your loan amount is, you know, $750,000 If we keep it at 750, and we lower the rate for no cost out of your pocket, great. You know, if we save then we save you 300 bucks a month. Where do I sign exactly where do you sign? It's a great deal. Yeah. But if it's, you know, I'm just I hate paying people to see them pay a lot of money to refinance. Now, that's not a blanket statement. Like there's like I did a refi the other day for someone who needed she had about $40,000 worth of credit card debt, and she wanted to invest in another property and she needed liquidity. So we paid off her existing loan and we gave her about $150,000 cash out, paid off all her debt, and her even though her rate went up on the house, her overall payments dropped by something about 18 or $1,900 per month. That's great. Yeah, so she it's a major win for her and she's got no debt and money in the bank and money available for another investment.

John Laforme: 10:06

Yeah, my next step here is to when the time is right to refi. I want to pull money out of here and I want to add an addition on the back here.

Doug Smaldino: 10:13

That's, that's smart because you could, you know, you're gonna add value, add an adu to the back, you can get rent off of that or use that maybe that'll be your recording studio. I don't know. But the bottom line is, you're going to add value, every dollar you put in is gonna be $3 out. Yeah, I see it.

John Laforme: 10:31

Okay, now that's good information. So tell me more about okay, Joe. Joe, the average homeowner what what would you say to them if they walked into your office and asked you that well, how would you how would you handle that?

Doug Smaldino: 10:40

Cash, John, it's just you know, this is this is my challenge. This is welcome to my this is the cross I carry everyday. Is this. Talking to people they want to want to slim down and, you know, that's a by the way, I'm selling my podcast, I tell the name of my podcasts. What is it? It's gonna be called? Bring it in. Bring it in. Bring it in John Riggins scenarios. Okay, guys, let's, let's not we're not given us to attorneys and PhD students. You

John Laforme: 11:06

know, I don't know if you should have a podcast. You're not that good of a talk. No, I'm just kidding. You're a great talker.

Doug Smaldino: 11:14

Want to bring it in? I was like, just talking. Like basically just have a heart to heart one on one expectations and to say, Listen, guys, the whole thing you don't you don't wait to wait and then buy real estate. Okay, you buy real estate and then you wait. This is the this is a good point. John. Have you ever seen the movie unstoppable with Denzel Washington? Was that the coolest movie The locomotive? That was out of control? Yeah. Okay. Real Estate in our world is the locomotive. Okay, it's unstoppable. This this high interest rate environment, this all the things are happening the inflation the Ukraine, blah, blah, blah, has done absolutely nothing to real estate. Real estate is a juggernaut. Okay, yeah. Now, that might not be the case. And every single like, you know, Wichita Falls, Texas, you know, it may not be the same situation I'm talking to in our local market. It's a beast.

John Laforme: 12:07

Los Angeles is huge. There's so much work out so much. So many homes. There's so

Doug Smaldino: 12:11

many big corporations and technology, you know, everything's moving to LA LA stuff coming out San Francisco, Northern California. Even in Silicon Valley coming to LA there's Google's in LA and then an apples Netflix. There's just it's just crazy. It's just there's so much opportunity here. You know, people don't YouTube is here. Yeah, exactly. Exactly. And there's so much opportunity here. That's why the the end, there's limited supply. That's why these real estate prices keep going crazy. Yeah. So to answer the question, though, should people buy? I want to see people buy right now, right now today. They just need to get pre approved. We need to sit down, we need to bring it in. We need to look at their payments and the budget and be sure that they understand what those payments look like, after the tax benefits. Yeah, okay. Yeah. Because my goal John isn't to stop like even with you, you know, we could, yeah, that's so smart. I love the fact you want to add investment here. But hey, down the road a few minutes. Let's go buy yourself a duplex. Let's get your rental property. Let's get let's build a real estate portfolio. You know, I mean, this is you could do a lot of cool stuff with real estate. And you can really build wealth family. Here's

John Laforme: 13:18

a here's a good point. I don't know if you tell your customers this, but this is something that I literally wasn't even thinking of. I knew I knew there'd be a bit of a tax shelter when I bought the house because that now I'm owner, again, I'm not a renter. So I just had my first full year of paying mortgage, which is in 2023. Yeah. And I just talked to my accountant. And he goes, by the way, I said, How much gonna always like, Oh, you're gonna owe this much. I'm like, you realize that's like two thirds less than what I paid last year. He goes, Well, that's because you mortgage

Doug Smaldino: 13:48

Yeah, exactly. Yes. That was

John Laforme: 13:51

beautiful. So that, that there when someone's worried about the high interest rate for now, just to get in the door, if you can lock it in, you're in the game, right? If you get in, you're in the game, and then you could just refi later, but I don't know if you approach it that way. Let them people know they're going to have a tax break. Always.

Doug Smaldino: 14:08

Always. That's the that's the that's the secret sauce, the tax benefits. And then what you're talking about, there's the current tax payments, and didn't even take into consideration the future tax benefits like the, you know, the deferred tax sale that the 250 or $500,000 Right do any you know 1031 exchange a stepped up basis. I mean, it's just such a myriad of of tax. Yeah,

John Laforme: 14:27

you gotta know what tax professional like yourself, they walk you through all that. Exactly.

Doug Smaldino: 14:32

And we that's what we do, John, we give a much higher level, a consultation service. I want our people to understand what they're looking at what they're doing. I want them to build wealth. I love to see people build wealth.

John Laforme: 14:44

I need to I like people to be excited. This house is definitely

Doug Smaldino: 14:48

more than you paid for. It didn't make you made money already.

John Laforme: 14:53

It was called timing. That's absolutely my telling you my inner timer went off and in the past I've had other other homes and I've I've made up pretty well. We picked picked a great one. So I'll timing. So one thing I want to do is thank you in person for getting me the house. I was meant to start with that, but I got the strike. So

Doug Smaldino: 15:11

thank you for being such a great client, John. So it was great to get you

John Laforme: 15:15

in, even though I panicked, even though you're okay. All right. So let's see, I want to let everybody know that I did panic when I was going through the process, as I mentioned a little bit earlier. And I was like, oh, man, these kinds of these guys gonna pull through I actually talked to another lender.

Doug Smaldino: 15:32

Well, you know, you got six and a quarter, which is an excellent rate. Yeah. And at the time, the rates were pushing higher. Yeah, luckily, we locked you in at the right time, because another day, it would have been about six and a half bumped us out of qualifying. It was pretty tight.

John Laforme: 15:47

It was very, I was walking the tightrope. Absolutely.

Doug Smaldino: 15:50

Okay, so

John Laforme: 15:52

what percentage of a rate drop is worth refinancing? I think we touched on that a bit. So give me how's it work? Is it a point half a point? How does it typically work? In

Doug Smaldino: 16:02

general? Depends how on the loan size, you know, the larger the loan amount, the smaller the rate drop, you need to make it worth it. But in general, the rule of thumb is about 1%. Obviously, you know, 1%, because keep in mind, like the other thing we're other lenders don't tell you is that if you're into a loan, like right now, you're a year and a half into your loan, right? Yeah, 20 and a half years. Now we could read we can refinance you on a loan for 28 years. We don't have like, it doesn't have to be a 30 year fixed. Oh, really? Yeah. So we can put you in a in a 2829 and 27, year loan, 26, any anything you want? And but if you compare apples to apples going to 28 and a half year loan, you want to be sure it makes sense. And that you're saving enough to go through the hassle, the aggravation. But yeah, if it's gonna save you 300 bucks a month and not cost you anything. That's where it really starts to make sense.

John Laforme: 16:57

For example, what if, I mean, what are the odds of me saying, hey, I want to refi see what you can do for me? And then you say, Okay, well, I can, I can refi, you could take maybe 150,000 out or 200,000? out whatever. And with the new refi rate, you're still going to pay the same amount of mortgage you're paying before with the loan.

Doug Smaldino: 17:19

Yeah. Does have a possibility? Absolutely. Sometimes, if the rates high enough, like there's people that, you know, like, like, let's look at what happened last year was the big news of 2023. It's the writers strike, right? Oh, yeah. So the writers strike just

John Laforme: 17:32

drove by him every day. Yeah, I mean, look at our bank, it hit probably,

Doug Smaldino: 17:36

Gosh, 75% of our client base. And so what happened is a lot of those folks that are getting loans now, or got loans towards the end of the year, last year, we went back to work, they got loans that are much more expensive loans, like they're what we call non QM loans. They're based on other things other than tax returns. So they're more expensive there, I still recommend them. But those are the folks that are going to be you know, they're back to work. They're gonna show live income in 2024, file their 2025 tax returns, and we'll refinance them in a year, year and a half, and they're gonna be nice and nice. So those are folks that could take possibly take money out, and they won't have much impact on their monthly payment.

John Laforme: 18:18

Oh, that's cool. Yeah. That'd be good. Because it says, because you're saying, Well, it probably makes more sense for me to wait to a one one point drop.

Doug Smaldino: 18:25

Yeah, I think so. In your case. Yeah.

John Laforme: 18:27

And do you think that's probably gonna be what you're predicting what 2025 around there?

Doug Smaldino: 18:31

I'd say. End of 25. Yeah. Okay. Yeah, we got a ways to go.

John Laforme: 18:35

Yeah, we do have ways to go. It ain't gonna happen tomorrow that Oh, no. And now, let's talk about actually refinancing. Now, I recall going through a deep cavity search during the initial loan. Yeah. Wow, you guys wouldn't even let me pay a $300 revolving credit card payment that I had that just came due. I'm like, I'll take care of it. No, no, we have to do that as part of the escrow. No way. So tight. And so is that going to be the same process for the refi? Or is it a little bit a little bit more lacs? Because you've been paying the mortgage all this time, but for

Doug Smaldino: 19:19

the most part, it's the same but but keep in mind, it's based on current tax returns, not on what you show. So if you show it if you're making more money, which most people make a little more every year, yeah, it'll probably be a little bit easier. So may not be as dramatic. Just make sure the process is the same but may not be as bad. Just

John Laforme: 19:37

make sure you get no credit card debt. Yeah. Car payments or

Doug Smaldino: 19:41

stuff. No, it's good point. We make credit card debt. You know, John, there's part of the problem with the low inventory is you've heard the term house locked. Yes. Okay. So what it was that mean? Well, you have people that would otherwise like to sell and move or buy something else, but they're in there two and a half percent rate In Atwater Village or Highland Park or Mount Washington, or, and there's no, I ain't gonna go get rid of Islam. The problem is that in the meantime, they have, and they're racking up 3040 $50,000 with a credit card debt. They're paying on the credit card debt, they're paying like 20 25% interest rate. Now that's not, but they have that 3% rate on their first mortgage that they want. So we got to part of the press education Look, guys, you're paying on this 50 grand, you're paying the blended rate of all this price seven 8% Let's get you let's just refinance the whole thing, put into the mortgage, and then you have no debt. Yeah, or you can it's okay to sell us. You gotta

John Laforme: 20:41

pay your statement balance every month, otherwise, you're gonna get nailed with Well,

Doug Smaldino: 20:45

there's a lot that I just saw something credit card default rates are way up, really way up. So, you know, the economy, they talk to me in game about how hot the economy is. It's not as hot as people think. And, you know, you that's usually a telltale indicator is the credit card default rates, and you're seeing them, like every one of the banks are reporting much higher default rates and your credit card. So and it makes sense, because people are ramping up, you know, racking up the credit card debt and not using home equity indebtedness to finance, whatever they're buying, because they're they don't want to get rid of that low interest rate first. Right.

John Laforme: 21:26

Right. Right. Gotcha. Yeah. Makes sense. Some people learn the hard way. So dug one of your talking points was what are the different lender types that we can get a loan from IE banks and credit unions, non bank, direct lenders, mortgage brokers boutique? Direct lenders fill me in on that? Yeah,

Doug Smaldino: 21:43

well, basically, I would put them in three different buckets. John, you got your traditional banks is bucket number one, that'll be your Wells Fargo, Bank of America, Bank of America Chase, you know, those types of things, they're going to be pretty good on rates. And they still to this day, do the lion's share of mortgages, but they're going to be a much difficult, more difficult to work with, they're going to be I mean, you like Wells Fargo, if you don't have a 700 credit score, they won't even talk to you. They're going to be they're very strict. If but if you can fit the square peg in the square hole, you're going to probably get a little better rate with a bank to be 100% transparent, but if there's any hair on the loan, for example, you had a bad year, you can't qualify if two years of tax returns, you had a little credit thing, you can't do, you know, a larger down payment, they're gonna be they're not gonna do the loan, they're just gonna end they're gonna be hard to work with. The second bucket is what we call retail, big retail. These are your big box, mortgage lenders. Okay. Now, some of the household familiar names you might know are Rocket Mortgage, yeah, they're a loan depot. New American Funding fairway funding. These are good, big mortgage companies. They're not banks, banks, banks, but their mortgage banks, they are across the country. There's a lot of good people, I know that work there, right, but you're gonna find because of their extreme overhead, they're gonna be fast, they're gonna be expensive, okay, they're gonna be probably fairly easy to work with, but you're gonna pay the most money. Okay? The last bucket is probably the best bucket of all, which is the local mortgage broker, slash boutique mortgage banker, like us, you know, we're local, we're licensed in four states, not 50 states. We do most of our business here, and you know, the east side of LA, and our appraisers, our people are right here states a when we're in California, Arizona, Texas, and Florida. And there's some reasons, strategic reasons. Yeah, sure, relationships, most states do a little bit, but California is the biggest state and, but with us, you know, you're working with not only do you get access to everything, you know, everything that the bank has everything that big retail has, you're gonna get through us. And then some, and then we have stuff that, you know, in case of emergency brake, the glass type of thing, you know, we have the non QM loans, we could do foreign national loans, we could do banks, if you're you have an issue with I've seen several writer clients, they had problems with a, you know, qualify now, because the strike from last year, but um, we have a whole suite, that's going to be tough. It's really tough. We have a suite of non QM loans that are just wonderful. So they'll get in, we'll close on the house today. And next year, we'll refinance them after we file the 2024 tax returns and boom, they're done. Yeah, that's

John Laforme: 24:48

the ticket. You got to get in the door. And that's what we're trying to tell everybody here. You get it, do whatever you gotta do sell your cars, whatever you have to do to get in the house. You can always get your cars later. I've taught them every night drill now Number one, if you have a house, you can get any car you want. Absolutely. That's that's just how it goes. But if you gotta refi and are you just trying to get in that first house? That car is going to be a big wait. Yeah, at the banks gonna look at and I mean, I paid off two vehicles to get this house. I remember luckily I had the cash. Yeah, I had to. Yeah said Nope. You can't have no car payments. I'm like, what? That's nuts. Yeah, it was nuts. But I've always had a car payment. But you know what? I'm happy they did because now I don't have a car payment. Absolutely. And I am not going to buy a new car. Yeah, I got about $100,000 in the driveway. Yeah, that's how I look at.

Doug Smaldino: 25:38

You have a nice Jeep though. John, come on.

John Laforme: 25:40

I got a van. And I got a van out there too. So I got a couple cars and everything's paid for. So I'm thrilled over that. Yeah, I'm really happy that they forced me to do that. Because otherwise I'd probably still have the pain on it. Yeah.

Doug Smaldino: 25:51

And that's the message. You get it? Yeah, I'm trying to miss it. I'm trying to pass on to all our first time homebuyers that. Hey, guys, take that sacrifice. Now. You know, y'all need the nice car right now. Let's just get something, right. Let's just get in this house. Let's get in the house. Because once you're in, you're in the game, like you said that.

John Laforme: 26:10

That's like Kevin Brennan said that to me was John, you're in the game again, you know exactly when you're in the game. So as far as, as far as I'm sure you can answer this, I'm pretty sure I can answer this for new homebuyers. And where's the first place they need to start thinking about getting a house that they need to go to a lender first, get a realtor that knows a lender first.

Doug Smaldino: 26:32

Usually, we recommend the lender first. But you know what, it doesn't really matter as long as they know that they're kind of the bridge between the house them and the house is going to be the loan, you know, and we tell them look, there's three things that you want to focus on. It's your credit, it's your down payment, and it's your income. Now, you know, credit, you need a good credit score, no reason not to have a 740 PLUS credit score, you know, if you have credit card debt paid off, by the way people think that they have open credit cards like a visa that's they rarely use, they just close it, don't close credit. Don't close credit cards, pay them off, keep them in the drawer use buy something on Amazon once in a while or buy used for a Starbucks coffee. Yeah, but don't pay don't close them. That's and then monitor some of the scores you get through the Credit Karma and all that they're not bad, but they're not the actual real thing from the credit bureau repository. So that's with credit down payment, you know, you guys gotta save, good people have to save, that's tough. That's save it you know, that's tough saving is a tough thing. Guys save direct deposit, have money, pull off your your check rent or savings account, like an online account.

John Laforme: 27:44

Or maybe or maybe you have a current investment, and maybe it's time to cash out on that investment and turn that into another investment. It's also something to think about too. And

Doug Smaldino: 27:53

that lot of things we tell clients like moms and dads gives a lot give a lot of gifts for downpayment and they can cosign Wait

John Laforme: 28:00

a minute, what.

Doug Smaldino: 28:05

And then also a good place to get money is your 401 K, you know, to take a loan alone, alone after blowing off the 401 K not a distribution, because a loan is not taxable. Now one little asterisk here, just for our viewers, John is that if they take a loan from the from their employers, 401k they can use it for the down payment cool, they'll repay it to themselves cool. The thing is, if they sever their relate their employment with that employer, then that loan is due or it's taxable. So just a heads up, I think most people know that. If they're gonna take by house and take the loan off their 401 K, they're gonna stay that employer for a while, but just the will some for our viewers to know that's a little little thing to be aware of on 401k loans, but those things are there's some people who have you know, hundreds of 1000s of dollars in their 30s and they can pull off their 401k Generally it's the lesser of 50% of the balance or 50 grand but that helps towards the down payment

John Laforme: 29:06

but what's the interest on borrowing money off a 401k

Doug Smaldino: 29:09

That's pretty low 4%

John Laforme: 29:12

Maybe like I say like 10 are no no like credit cards No.

Doug Smaldino: 29:17

And plus you're paying into themselves it's their own money. So that's that and then the last thing is the income you know, it's pretty straightforward if you're a W two work for somebody if you're self employed, here's where here's where like most people like you John are self employed in LA so this is where there's a little bit of tug of war push and pull with the the accounting world the CPAs that want to chop down the income to report minimal income and pound their chests out. John only paid 1500 bucks worth of taxes. Woohoo. Well, that's all well and fine though. John needs those tax returns go get a loan. Exactly. So there's always got that actually, if you're thinking about buying the give and take it Exactly, it's a give and take. And if you're thinking about buying a house, maybe next year, get the Be sure that the lender reviews the tax return before it gets filed. So we're telling people that we just finished tax season two weeks ago. We now py people extended run extension. Cool, right? That's normal. But now they're starting to get do the tax returns in May, June in the summer, say, Look, if you haven't filed your tax return, go ahead and get it prepared. And we'll review it before it gets final right to say what you can because we can right now. Like, I'm not gonna sit here and apologize, John, because I'm the smartest guy out there. tell you, I tell my buyers like hey, we're gonna we're gonna review the returns in depth before we file it to ensure that they qualify right and not let the CPA like

John Laforme: 30:49

Big Brother looking over everything. Yeah, sure. It's gonna you're gonna push it through you, you're you're trying to run a business, you're trying to make your money, and you don't make your money unless these loans go through. So you're going to help people prepare.

Doug Smaldino: 31:01

Yeah, I want them to get the loan. And sure, you know, most people that you know, if you're self employed, everything's tax deductible. You know, you got Yeah, lunch with your buddies, go to a game, find a way to make the business deduction? Well, it's okay, we're gonna take a little break from that for a year,

John Laforme: 31:16

then your your, your net income is too low. And that's why you're not going to qualify. So gotta be careful with that because I tell you, we consult we consult on all that stuff. I always tell people you know, there's there's people who live up to like to live with cash thoughts. They think about like a cash. I can do it. You can't do shit with cash.

Doug Smaldino: 31:32

No. Anything with cash is trash. What are you gonna do?

John Laforme: 31:35

What are you gonna do with cash? So, you know, there's, there's, it's kind of like, when you walk in, when you walk into life, you're like, Okay, well, I'm on this side. I'm gonna stay cash. I'm gonna hide a lot of cash. But then when you really need something like you were really found a house you want to buy and maybe decided to get married? Who knows? And all of a suddenly, wow, all those years I was hiding cash. Now I can't qualify to get what I want.

Doug Smaldino: 31:57

Exactly. It's very complex. Don't take cash. No, you don't

John Laforme: 32:03

want to buy a used car? You can probably use your cash. You probably that's about it. That's about it. I don't even think new car dealerships will take cash for a new car with a cash payment. I'm not even sure about that.

Doug Smaldino: 32:13

One of the government cracks down cash. I wouldn't be surprised. They don't. Yeah.

John Laforme: 32:16

So anyway, here's a here's something I do want to ask you. How does anybody know that their realtor is referring them a reputable lender? Now do lenders? Do all lenders get to pick and choose out of the same pot? That's the question. That's the confusing part for me when I was doing this, is how do I know you're the right guy? And how does someone else know me? Oh, my guys better? What makes that difference? Can you explain anything? Yeah, definitely.

Doug Smaldino: 32:45

I look, I think the first step for any potential, you know, person has been referred to a lender needs to know what those three buckets they fit into, oh, I'm being referred to someone to chase Okay. Working with a big bank, oh, I got referred to rocket being referred to retail big retail box or three and being referred to a local guy, boutique, a boutique guy like yourself, like me, right? Obviously, it's gonna be the best boutique.

John Laforme: 33:13

But you get you get better service, maybe,

Doug Smaldino: 33:16

right? more personalized, absolutely much better service. But, you know, if you really want to compare apples to apples, this is like, almost impossible. But if you if you submit your documents to like a bank, or to a large retail company, or to a boutique firm like us, you're supposed to give them a loan estimate, which will break down the closing cost, the loan fees and all that they can compare. Okay, that's what the that's the textbook. way to do it.

John Laforme: 33:43

Okay. When you're just feeling people out, yeah. Lenders out, yeah, but there's

Doug Smaldino: 33:47

much first of all, those things sometimes aren't worth the paper they're written on, because if I get a loan estimate today, and then I end up buying the house, three months from now, it's not reality, it's, it's just a, you know, it's fiction. So, a big fan of the loan, the fan of the Loan Estimate, I think what you want is someone who's going to connect to have the right connection, right energy for you, and also the one that's going to be able to explain and step out of the box. Now, obviously, I think we're the best lender out there. But the bias that just I'm a little biased, but of course if it were me, like if I was gonna go select a lender and I couldn't choose me, I would you know, I would look at the the more about the loan officer than the company, you know, the company is good, you know, you got like a, you know, like any of these companies like the banks are good, the boutique lenders are good, the retail companies are good, but you want and see, are you working with a consultant? When are they going what's their lock policy? How long can they lock you in for what happens if rate what is the question that I was asked is like, what happens if I lock my loan? And then, two weeks later, before we close rates dropped dramatically, somebody

John Laforme: 35:00

He unlocked it. Oh, that's, that's a better one.

Doug Smaldino: 35:03

Yeah, what happens? Well, you know, like most lenders are gonna say, sorry. Yeah, sorry, we have a flow down policy, you know, they really don't, but they say, you know, down. Yeah, but you know, for us, we you know, we just have some A, we have so much product that you, you're able to we're able to move that loan bottom line. The bottom line is options. A bottom line with free that any first time homebuyer is better off working with a broker, or a boutique mortgage banker 99% of the time, unless there's some when putting 40 50% down or just has like a pristine credit and pristine job and they can go to Wells Fargo and get that super low rate. That's the only exception. But not everyone knows. Like it's kind of common knowledge and everyone knows cheaper to work with a mortgage broker, right? I mean, you knew that when we talked before. It was cheaper, we're cheaper, we get a better rate, our fees are less or our overheads less so it's gonna be a better rate. No, I

John Laforme: 36:04

didn't know the comparison. Yeah. All right. So that's why I'm asking why was there to work with a mortgage broker, because when it comes to numbers, it's easy to lose me. Yeah, I'm not I'm not a numbers guy. I can't crunch numbers fast. But give me time. I can I can figure it out.

Doug Smaldino: 36:18

To screw in the light bowl, John. But now you I looked at my messages. first time homebuyers should work with a broker. They're gonna get better service better expertise. They're gonna pay less bottom line.

John Laforme: 36:30

Yeah, I mean, I do remember the experience with you guys. And I was I believe it was Mike. Yeah, Mike. And he was always emailing me back and forth. He's always easy to get ahold of. So that was important to me. Yeah. So I do. I did like the service.

Doug Smaldino: 36:45

When you work with like a big retail companies have these layers of management. You're gonna talk to a different person every time you call it lions department. Yes. And ran overhead and branches, blah, blah. We don't have any of that stuff. Just get past low rate. Yeah, wholesale rate pass on to the consumer. That's why consumers, most consumers get it that it's cheaper to work with a mortgage broker.

John Laforme: 37:05

Right. Right. Never had that conversation before. Yeah, good thing. I recorded this.

Doug Smaldino: 37:10

That's a great question. I'm glad you asked.

John Laforme: 37:13

So anyway, once again, glad, everybody let everybody know where your businesses and how to reach you. Absolutely.

Doug Smaldino: 37:20

We're located in hillhurst mortgage in hillhurst Avenue in Los Angeles. You can find us online at www dot hillhurst. mortgage.com. Send me an email. Check us out on on Yelp and Google we have five star reviews all over the place, and

John Laforme: 37:36

was most listened to me a new podcast?

Doug Smaldino: 37:39

Bring it in? So we're just here with your help. We're launching the first episode we already did the first episode and the mock episode. We're gonna hopefully launch the first one later this month.

John Laforme: 37:49

Well, I gave Doug in one of his staffers a little information about how to get the podcast started up because somebody helped me do it. So I'm just passing on the knowledge. That was very consultation on consultation. Thank you very much.

Doug Smaldino: 38:03

Oh, by the first round of drinks.

John Laforme: 38:07

Everybody Thanks again for listening to the buying home. Don't panic podcast, our guest today, Doug, small Dino and thanks again for getting me my house and

Doug Smaldino: 38:16

our little studio here. Oh, yeah, that's great. Look forward to do this again sometime soon. John, thanks.

John Laforme: 38:21

I'll be on your podcast. Yeah, you're

Doug Smaldino: 38:22

gonna be on it for sure.

John Laforme: 38:23

We're gonna talk about first time homebuyers and what they need to know about the inspection. I can't wait. All right. Let's do it.

Doug Smaldino: 38:30

All right, John. Thanks so much.