This week’s episode pulls back the curtain on the complicated yet critical world of condo financing. In episode five of Condo Artist: The Other Side of Real Estate, host Uri Vaknin speaks with special guest Dino Schulatz, Vice President of The Federal Savings Bank, to help listeners gain clarity about the fine details of mortgage types, condo building qualification, interest rates, tax write-offs, and more.
You’ll learn about the trifecta of mortgage financing – Fannie Mae, FHA and VA – and what they mean for both condominium buyers and buildings. Dino breaks down the definitions, guidelines, requirements, and fees for these three loan types plus Freddie Mac, fixed rate mortgages, and adjustable rate mortgages.
If you are involved in any aspect of real estate – buying, selling, developing or investing – this episode is a must-listen.
About our guest:
Dino Schulatz is Vice President of The Federal Savings Bank, a veteran-owned bank headquartered in Chicago. The bank lends in all 50 states and Dino has closed every type of residential and commercial loan. Dino moved to Las Vegas from Chicago in 2014 to help bring homeowners and families back to the downtown area. Learn more at thefederalsavingsbank.com/dinoschulatz.
This episode is brought to you by Juhl Las Vegas, loft-style condos located in the heart of vibrant, downtown Las Vegas. From the low $200s to $1M. Learn more at JuhlLV.com.
This episode is also brought to you by One Las Vegas, luxury high-rise condos featuring two and three bedroom plus den residences. From the low $400s. Learn more at theonelv.com.
Subscribe to Condo Artist: The Other Side of Real Estate on Apple Podcasts, Spotify, and Google Podcasts.
Uri Vaknin 00:16
Welcome to the fifth episode of Condo Artist: The Other Side of Real Estate. I’m your host Uri Vaknin, a condo sales strategist who has developed and sold out thousands of condos in Atlanta, Las Vegas, all over Florida, Detroit, Texas, Nashville and all across the United States. Each week I along with my co hosts and colleagues, Shahn Douglas and Mark Bunton. Hello, Shahn is not with us this week. But we will bring you the latest insights best practices, and sales techniques to sell out on more condos faster no matter the market. At times, we will delve into architecture, financing, design, and urban planning as a pertain to condos and condo living. I am an admitted podcast junkie. But in our search for podcasts about condos, we all realized that there really weren’t any out there. Throughout the series, you will get to know more about me, Shawn, and mark and our 53 years of combined experience in the world of condoms, one of the things that will become glaringly obvious to us is that most people, including real estate agents, buyers, architects, and even condo developers don’t fully understand condos. And I’d like to add even a lot of mortgage lenders don’t understand condoms. This podcast will pull back the curtain on the world of condos.
Mark Bunton 01:43
You know, you mentioned that a lot of mortgage people don’t understand condo mortgages, but I think it’s just don’t really have the experience with it. You know, the majority majority of mortgage that they’re seeing are single family homes. So they just really haven’t had the exposure to it that but
Dino Schulatz 01:59
Mark Bunton 02:00
Uri Vaknin 02:01
Well, I think it’s, I think you’re right, they’re made the experience, but they don’t even understand condo mortgages. I mean, that’s a no till you figure it out, you get the opportunity. So if you haven’t noticed today, we have our first special guest, and his name is Dino Schulatz. And I will introduce him in a minute. But before that, I want to give a little bit of background. So at the end of 2013 December 2013. We bought a portfolio of 1300 condos in five different condo communities here in Las Vegas, these were leftover from the Great Recession, technically, they were called fractured condos, meaning that they were no longer viable as condos and became rentals. And our purpose in buying them was to bring them back to the market on a retail basis and sell them one by one to individual buyers. We went to to bring them to the market in a thoughtful and strategic manner. But at that time in Las Vegas, there was no condo mortgage financing available for buyers. So if you went to to buy a condo here, you basically had to pay cash. And unless you had some great relationship, you know, with your private wealth management company, and they went to do a private mortgage for you. Otherwise, you weren’t buying a condo here. We were inundated with coming out of all the foreclosures and short sales that really impacted the values of condos in Las Vegas. So prior to me relocating to Las Vegas, which I came here in March 2014. To start this project, I was working on condos all across America, but in particular, I was working on a portfolio of condos in Atlanta, there were also fractured condos, and one of them was a 40 storey condo tower. And no one would offer mortgages on that building either. But there I met a bank called the Federal Savings Bank out of Chicago, and young guy there who was determined that his bank could pull off condo mortgages where none else could. So once I got to Las Vegas, I you know, got touch with the Federal Savings Bank in Chicago and said, hey, I’ve got this portfolio. He said you could do it Atlanta with Can you do it here in Las Vegas. And so we got to work. And long story short, we had the first condo high rise in Las Vegas since way before the Great Recession to receive or to achieve what we call the trifecta of mortgage financing. We got Fannie Mae approval, FHA approval, and VA approval and that had been unheard of Since before the Great Recession, we actually received a significant amount of press due to the significant achievement. It also represented to the rest of the United States. And obviously to Las Vegas, that the Las Vegas condo market was back. And it felt really good for us to be credited with bringing back the condo market in Las Vegas. But obviously, we could not have achieved this without our incredible lending partner, the Federal Savings Bank, and today’s guest, Dino Schulatz with the Federal Savings Bank.
Dino Schulatz 05:37
Hey, Uri, thank you for having me. I really appreciate it.
Uri Vaknin 05:39
What our viewers would love to learn more a little bit about first its tell us about you Dino.
Dino Schulatz 05:45
Okay. Okay. Absolutely. Well, I mean, our, you know, we came about and we met already, because our missions were aligned to right, we wanted to, we saw the impact that 2008 had, in a negative fashion to the housing market. And we wanted to bring back condo financing, you found the project and the location, we wanted to help nurture that and bring it back to what we thought would be the trifecta of mortgage options, having all three of them on there. The reason being would be to essentially just get these many single family homes or people living in the downtown area is possible. But do you know, tell us about you. Okay. Yeah. it to me myself. You know, Dino Schulatz vice president of the Federal Savings Bank, the Federal Savings Bank, is a veteran owned bank out of Chicago, headquartered in Chicago. We were telling you, you say veteran owned bank? I mean, obviously, yeah. It’s important. And why is that important that, you know? Well, I mean, I believe that the military mindset is a great way to run a company, all four of the owners were helicopter pilots in the army, they were close through, it had a close relationship. And they built this, this bank from ground up. So we had, they were originally just a broker where they did not have any money themselves and were put themselves in such a good position that were every other bank was running for the hills on in 2008, they were actually able to acquire a Federal Bank during 2008 and move on there and obtain that federal license, because I’m not sure you know, but you cannot apply to be a Federal Bank, you have to acquire a current one, to have that license, that opened the door to be able to lend in all 50 states and gave us on, you know, what we thought to be the best way to operate post 2008. And post Dodd Frank, which would be to have the federal license. So just that Dodd Frank, one sentence on what Dodd Frank is for Dodd Frank was a bill that was written after in reaction to 2008 in the housing market. And it was essentially tried to repair the financing to make it more difficult to get a loan but more difficult for the benefit of the United States, right? verifying their income and their assets and their credit more thoroughly. And to ensure that if someone’s buying this home, they can afford it. Because that was that was starting to slip away previous to 2008. But Dodd Frank also didn’t make it so easy on the back. No, it is very, very difficult to do a mortgage in comparison to then, um, you have to be a professional and you have to know your guidelines on but I do feel that these rules were for the benefit of the country as a whole. And you can even see that now during our COVID. We’re taking a pullback, I mean, COVID is damaging to to the country as a whole. But as at the same time you see real estate prices are rising. And I think that has a lot to do with the house salad, the buyers that own in post 2008 are and what they had to do, they have the equity in their home. There, they have their their income, and they’re just a better overall owner of a property than would have been previous to 2008.
Uri Vaknin 09:09
That’s a great point. Because the buyers that we’ve seen, you know, our buyers from do our demographic analyses, and for those of you who listen to our previous podcast of who’s your buyer understands that we dive deep into the data, and 40% of our buyers have purchased with cash, you know, and my favorite line is you can’t foreclose on cash. I love it. Well, I love it previous to the great, you know, cause of the great recession is that people were not only 100% financed, or they were 100 510% financed. Yeah, and they were flipping and they weren’t real owners. But do you know tell us So were you you were living in Las Vegas? You were living in Chicago?
Dino Schulatz 09:47
I know. Yes. I was living in Chicago, I exited I was a trader at the Chicago Board of Trade previous to this and so on my knowledge of the economic, the economy as a whole I think was probably my biggest attribute and I saw The opening of being able to help bring our country back. And that would take me moving to Vegas. Um, so I packed up and, and I moved out here to work directly with you, which I think the last six years have been amazing. Um, and I think we’ve done an amazing job at helping families just just do I mean, the biggest, the best thing you can do is help family grow financially and be more stable. And I think we do that every day. And and I love that. Let me ask you a question.
Uri Vaknin 10:33
You know, as I stated at that point, there was no one no bank was going to do mortgages here. Correct. We didn’t have Fannie Mae, we didn’t have VA, we didn’t have FHA. And well, I think it’s just kind of, yeah, I, you know, I love Las Vegas, and it’s such a great city, and you can’t have better weather, you can’t have better entertainment, better restaurants. Um, but we aren’t known. We’re, we aren’t known for sort of the strength of our buyers here. Correct. You know, every other market that we’ve all worked in, except for maybe Miami, more people give you their w two form. Yeah. Here, people don’t have to get w two for Yes, yes. Very interesting. To me to add to that point on, it took on unique financing financing, where maybe we would ask for 24 months of their bank statements prior to instead of their tax returns or on a you know, show me a bank account full of cash that I can do a calculation and turn into a monthly income stream that you have to use alternative financing options and know your guidelines. So those are the facts. No, I know. those are those are true, but that’s a really good point. I love it. So the purpose of this podcast is to really pull back the curtain on condo mortgage financing, because you know, it is slightly different than a single family home. Correct. So our listeners have heard me and you use these terms. Fannie Mae, FHA and VA, I must have said it five times now. Yeah. And we take it for granted that people understand what that means. Yes. Um, so it means one thing if you’re buying a single family house, it means another thing sometimes if you’re buying a condo, correct, can you Yeah, illuminate us?
Dino Schulatz 12:24
Absolutely. Absolutely. Um, so the number one thing that I want to drive home is that for if, if you are going to get approved, when you go to a lender, the the type of financing that you’re approved for the building also has to be approved for and that is a big misstep. So I you run into people that come in and say, Hey, I have a pre approval letter, I’m ready to go. But the debit, they’ve only done half the work. And they haven’t figured out whether the condo that they were in, offers this financing. So Fannie Mae and Freddie Mac are were to say, Wait, you just threw in another one Friday night? I know, I know. I’m coming. I know, I know. So those two entities were separate of the government previous to 2008. The government took a hold of them to save them, essentially. I’m in there. And they, what happens is after we do a loan, we sell the entire loan to Fannie Mae, and we get our money back. So this is an interesting point, which a lot of people whether they’re buying a condo, single family house or whatever, correct. don’t really understand banks, most banks and Western the giant banks, and they’re usually the jumbo loan for specific clients. Don’t actually keep the loan on the mortgage on the books. Yes. I mean, to further your point is the bank, the banking industry, divided into two from the mortgage standpoint, divided into two entities. There’s the origination banks, banks that do loans, and then there’s the servicing banks, banks that just collect payments. And that’s what it is. That’s all I do. Now, for me to offer you. We are in a we have interest rates right now that nobody alive today has seen it that low. That is that is a true statement. We’ve been hearing for years now historically low interest rates. Yes. And so would it be hyperbole to make this statement is that today’s rates are the lowest recorded mortgage interest rates ever in US history. That is correct. And right now you can take advantage of it. And even on now between here and three years ago, you have about $100,000 more of buying power than you did even three years ago. That’s pretty powerful. That is an enormous, enormous change in the market and it is something to be taken advantage of. It really is you know, in one of our earlier segments, we used the term you know, your purchasing power, your buying power, instead of people saying get pre approved. You know, find out your buying power. Yes, in today’s world. It really is power it is it is I mean, you do think about that if I put 5%, down on a $400,000, home, that is $20,000, I’m investing right? Now, if I have that 5000, that $20,000 in the stock market, five years from now that 20,000, maybe 27,000. But that $20,000 in a $400,000, home, could be at 90 100,000. Because you’re taking your $20,000. And leveraging a large $400,000 asset. And in the growth of that asset, even if it’s at 2% or 3%, a year is going to do much, much more than than the stock than the stock market would for you. And that is something that you have to take into consideration. This is the only country in the entire world that allows you to come in with that little of a downpayment and leverage that large of an asset. And you do that and you overpay your mortgages. Another one that I tried to tell everybody to do, because you could you have unlimited overpay, and that does a lot of damage that interest that you have to pay, like that’s what I mean by damage, the damage is good. Yes, yes, you want to have the least amount of interest, it’s not your interest rate that matters is the amount of interest you pay before you’re done with that loan. And by overpaying the mortgage that additional money goes directly to the principal and pays it down. And if you have a 30 year mortgage and overpay by two $300 a month, you can turn that into a 15 year window probably saving hundreds of thousands of dollars. And then on the backside that mortgage interest that you’re paying, you get to write that off on your own. Yeah, that is a tax write off that. I mean, I would say a 1500 dollar mortgage payment is equal to I’m sorry, a 1500 dollar rent payment is equal to $1,000 mortgage payment because you are getting 500 on average 500 $600 back real money back you right you you the all that interest you paid us as a tax write off, that could be 18 $20,000 of additional tax write offs that you have every year year over a year, saving you real money, five to $6,000 coming back to you year after year after year. And you can use that to invest or go on a trip every March if you want to. So now more than ever, it actually is more affordable to purchase a home than to rent at the market. I would absolutely say that that is 100%. Correct. Wow. So I always like to say the biggest single entitlement in America is not Social Security, welfare, whatever any of those things, it’s your right off of your mortgage interest. Because and that is a that is an entitlement program that is geared towards the middle class. Yes. And every middle class person should take advantage of it. So Otherwise, they are literally throwing away free government money, you are missing out on a huge opportunity. That is the one that reaches the most people. You know what I mean? You have a lot of your live investment and stock market things. But let’s be honest, not that many people have enough money to be in the market these days. But that tax that that interest rate off that you have on your home, that that is for everybody in the United States up to 750,000. Correct? Correct. So in Vegas, 70 $30,000. by the minute was everything? Well, let’s get that I mean, this has all been really exciting. And you just like we could talk about this for hours. But let’s let’s get back to condo mortgage financing. So you said something that was really key. So I would say I’m a buyer, and I’ve been approved for a loan and a Fannie Mae loan. And you said, but the building has to be approved to Yes, yes. So I mean, I obviously know what this means. But But tell our viewers what that means. Okay, so the rules that they have to follow are actually in line with protecting you as a buyer on the set of rules. And I’ll just go a couple of them. 10% of the money they collect from the HOA has to go into a reserve account, in case something breaks, now they have the money to fix it. They don’t want too many investors in the building less than one third can be investors. You don’t want too many investment homes in the building, because those are the first ones that people foreclose on when they have to foreclose on a home, you don’t want more than 10% one entity to own more than 10% of the building, because that single entity owning a large portion if something happens to them, that would negatively affect that building on so those are just a couple of the rules. But in short, it’s a you want major lawsuits, that’s the other way any anything structural damage or anything like that. So having in your in the buildings that I work with you none of that is an issue and that’s how I’m able to obtain that financing in those buildings. And I speak to that to every single client that that we have because it really is a huge benefit to allow me to have that financing that trifecta for finances. If you are going anywhere in the country to buy a condo, you want to make sure that they’re following those rules. Absolutely. Wow. So are they all the same rules FHA, Fannie Mae and VA, they’re not they’re slightly different. They have the same basis around them. But there’s slight differences between the two of them. And but they all are for in the borrowers, borrowers of best interest. So, which so can I use any of them as a buyer? Okay, VA or Fannie Mae or FHA? Oh, okay. So, um, no, actually. So like, they’re the three that we have that we’re speaking of that we keep repeating. His FHA would be one of the Federal Housing associations for his his who created this back in the, you know, back in the day.
Uri Vaknin 20:48
It was, like post World War Two or pre World War Two, it was it was hosted. And so basically, what they’re saying is that as a primary residence loan, only, you should post wasn’t a part of the New Deal. Oh, you go for what’s your what’s your answer, Jay?
Dino Schulatz 21:03
Oh, yeah, that is free. I’m sorry. I apologize. I apologize. Um, so what I was saying is that is a primary residence loan only. So you have to be living in that as your primary residence for FHA. On va, that is a veteran way. But so do i do have to put 20% down? Oh, actually, no, that is a three and a half percent down is the minimum that is it. And in the rates that you’re going to receive for an FHA loan. The only other loan that is lower than that is a veteran loan. And, and so it is literally the set, it’s number two in line. And we all know that we want to take care of our veterans. So it’s okay to be number two, bind a veteran, but you’ve got to pay mortgage insurance you do you have to pay mortgage insurance, and you have to wait, you know, yeah, what is mortgage insurance? Okay, yeah, so mortgage insurance actually is protection for the bank. And so what it is, is I thought protection during my mortgage, you know, I actually knew better Yeah, I think a lot of people actually think it’s, it’s a yes, it’s actually it’s because you’re only putting three and a half percent down, we have a loan for 97 and a half percent of the building, I mean, of the of the home that you’re in. And so we want to make sure that we are insured in case it goes foreclosed. You pay for insurance policy, for me on me that you are the beneficiary of, yes, you pay for insurance policies. If you feel if I foreclose, that mortgage insurance that I pay for pays, you would give me my loan back my loan the money back, basically. So but the thing with FHA is the guidelines changed in the last couple years that that mortgage insurance never leaves. So there are other loans to look at. As soon as you get 20% equity in your home, then you need to start looking at another mortgage. If Fannie Mae mortgage, a Fannie Mae mortgage will remove mortgage insurance, once you have 20% equity in the home on its own or too far off, I believe we can be if you are not currently in a Fannie Mae loan, you would have to refinance into a Fannie Mae loan. Okay, if you already have a Fannie Mae loan, there is a way to apply to get it removed. But it is not easy. There’s my sister tried to do it, and they wouldn’t let her do it is not the easiest process to refi Yeah, I would look to refinance, because if you’re bettering your rate at the same time, because because the rate that you’re given at when you’re only putting three and a half percent down is going to be a higher rate than when you have 20% equity in the home. So it’s probably to your benefit to refi. Anyways, when you reach that point, so if the interest rates are I mean, if rates Yeah, we know 1.75 now, yeah, exactly. 2.75 the lowest rate that I have given this year so far is 2.375. Wait, 2.75 I know if you charge me 3.35
Uri Vaknin 23:55
It’s a veteran loan, a veteran loan, I was able to give that low of a rate Well, good for the veteran absolutely deserve it. No, but let me ask you a question too. If I want to buy a million dollar condo, I’m gonna get I’m using FHA loan, right? No, I’m sorry, you will not. There you there the cat. There’s always a catch on they cap, they cap it at about 350,000 put in it per market. It is yes, it is based on the median income in that market. Okay. And so what they’ll do is they have a range, and that range s increases every year and changes every year based on the median income or doesn’t crease it can decrease when did a decrease after 2008? Yeah, exactly. How can our viewers find out what the mortgage payment amount is for an FHA? Well, you can always call me I will always tell you, but if you need you can really just google the information directly and put in your county, Fannie Mae loan, FHA loans, they’re gonna call you what number they’re gonna call 630-300-8516 D no shoe lots. I’m a vice president. Then of the Federal Savings Bank 630-300-8516. So okay, let’s go back to FHA loan limits. Okay, so if there’s a loan limit, and then there’s home price, yes, so so what I’m speaking of is if the loan cannot be above, say 350,000, for an example, that does not mean that the home has to be at that level, you it just everything above that 350 is now your down payment, and you have to come to cash. Now, that is not the only type of loan that there is a limit on Fannie Mae has one as well, but it is much higher, it was 510,000 this year. So if you are above 350, and you’re qualified in that range, your next phase would be to look at a Fannie Mae loan on up to that $510,000 loan limit. Again, at the end of this year, it would make an adjustment from my estimate will probably be around 545,000 would probably be then 2021 Fannie Mae loan limit, and and FHA will probably bring us just shy of 400,000. So maybe 375 in that range would be my again, my guess and then that will come out in the beginning of the year. And on January 1, we can use those new loan buttons so Wow, yeah. So let’s go to the VA because, you know, one of the things that we love I mean, we love our veterans, we love our veteran buyers, and here in Las Vegas, we not only have to Air Force bases no it’s incredible are very important very important. Know that any drone in the world that is flown anywhere in the world is guided and manipulated at Creech Air Force Base. That is correct even if the drone is flying in Afghanistan or wherever they’re they’re right there and I mean and you talking about Nellis? I mean we have many VA buyers do we have in Brazil? We have 12% of our buyers have been abused their veteran and their VA battery and i would say i mean you know those guys that fly over Thunderbirds Yeah, I was leaving a bunch of Thunderbirds we have like three or four of them they chose to live in these buildings It was a beautiful thing those guys are like Top Gun guys and but I’ve ever seen one before people yeah, girls and girls we have a girl with a girl they love kinda living because they’re on the go they’re literally on the go to people and they love the lock and leave lifestyle they love the amenities they love the gym at the pool, they get if they get stationed somewhere else they do not have to sell that they can turn that into a rental property and then they can purchase again Are you serious? Yes, because what happens is is the loan change the loan does not change. So they get to enjoy the benefits of a VA loan correct? Isn’t it correct and then if they want to keep it as an investment property, they can go somewhere else that is allowable now that when I say a primary residence, I mean at the point of the transaction, what are your intentions, my intentions are to live in it as a primary I am allowed to do a VA loan then a year from then it you know things change people’s lives change and you cannot control where the military is going to send you up. So if you get re stationed somewhere else you do not have to rush to sell that home you can you can you can definitely rent that out and in the condos that we have that’s seems to be pretty easy to do on there’s a lot of a lot of people that are sought after and those who can’t rent out too many because then what happens then we lose our financing options so we got to keep a delicate balance right? Yes. The third which is something that we’ve done to stay wise we’ve always maintained a delicate balance it so we can achieve the trifecta guess I mean this kind of financing is what my team does around the country and I love working with with you guys as a developer because you leave the owners in the best situation that could possibly be and you leave them with the best financing options extremely healthy Hoa all the major repairs that needed to be done and they had 200 stable appraisals in the building. That is the type of developer that I want to work with one that cares about the people that own and that you’re transferring ownership to oh thank you you know we take it very seriously. um you know homeownership has always been something very important dear very near and dear to me and I love to be able to get people to homes whether it the most the least expensive home I ever sold was 19,000 the most expensive was almost 6 million so that’s a big range. But you know, hey I got $100,000 loan going on right now where she she’s she had assigned from Australia and power of attorney to her mother in New York. It I mean sometimes the lowest loan amount ones are the craziest. You treat everybody the same they are all this is a precious home to them. You don’t get treat everybody Exactly. Your home with your castle. So what’s hard about VA loans because there are some some some things about being loans that people don’t understand. Yes, certainly. Okay. So is there a max amount that you can we’ll use there? Yes. So usually 510,000 was the max if it matches Fannie Mae typically, right. But now on the administration, that’s an office now made a change. And now it is just up to your qualification limit. 1 million is really where they kind of put that that ceiling now, but it’s just based on your qualification. And what I mean by qualification is we look at your credit, your your credit score, and then we look at your assets that you have, and then make sure that they’re yours and usable. And then we look at your income, and we compare your income to your debts and your debt to income ratio, including this new mortgage needs to be less than 55%. For a VA loan. That is the most relaxed one that’s there. You can go down to 50% on for a Fannie Mae loan, but still we try to keep people as far underneath that level as possible. We’re not trying to push the limits of their qualification on I feel that I’m almost suited fine. Not a financial advisor, but I am I’m out there making sure that they’re protecting I sometimes sometimes have to protect them from themselves.
Dino Schulatz 31:21
The best way to set if I buy a use a VA, zero percent down right, not you have no downpayment and no mortgage insurance. Okay, so no, so, but I do have a question. Yes. If I buy a million dollar condo, do I put zero down? Yes. I thought, if Now, what if I put 1,000,005 condo, okay, if you if you if you go above what the limit is right? Then what it is. So let’s let’s say that Bob the limit is 1 million and you buy a $1,100,000 a lot 1.1 what the difference is now is that you would have to you don’t have to come up with that full hundred thousand, you actually only have to come up with 25% of that, and the VA will still cover the other 75. So even though you’re above their limit, say that they still give you some extenuating, extenuating help there, and you only have to come up with in that scenario $25,000. And then the other 75 would be covered and alone. Again, we want to make sure that you are under that 55 debt to income ratio with all of this on. But yeah, that is by far the most relaxed, down payment guidelines that exist in this country. Wow, that is awesome. It’s just the interest rates are low in VA, the lowest the lowest, there is no mortgage insurance, no mortgage insurance. And but with a funding fee. Okay, so the VA itself needs a way to make money to operate this. So they have what’s called a funding fee, and it is anywhere from zero if you are, if you’re discharged from the military disable he then then it is zero, they don’t charge you all the way up to about 3.75% of the loan amount. And whatever that is, can you can pay that out of pocket. Most people just put it on top of the loan as an additional launch, you don’t have to come out of pocket. But that additional money goes directly to the VA office and helps fund this entire endeavor and allows them to give more loans to future veterans. So based on if you served for tours in Iraq, or it is yes. Or if you were stationed in Mali. Yes, that all matters? Yes. And it will be I wait, if you’re a veteran, I will ask for your dd 214 dd 214 is your discharge papers. And it will tell you how you’re discharged. If you are honorably discharged, then I will be oh and then you should have a certificate of eligibility that would that allows you to use a VA loan and that is what we’re we need to proceed is your dd 214 discharge papers and then I would use that to go get your certificate of eligibility and that tells us how much of a VA loan you are allowed to have. Remember we had one deal where the buyer couldn’t find their DD four to do dd 214 Yeah, and took a while to get one it did. And so that is that is the thing that you don’t get a new one. I mean, when you’re done, you’re done. So we actually had to go we have to we had to find this certificate of eligibility without using the DD 214 because there was no way of getting a secondary discharge paper so you should probably put your dd 214 with your birth certificate. It is something that you Yes, exactly. I’ve seen the oldest looking dd 214 that that you can imagine. Um, yeah, yeah, they’re they’re some interesting they’re, they’re crumbling, but you know at jewel. You know where you live? Yes, downtown Las Vegas. We have to World War Two veterans who live there. I did, I did one of their loans and he is a great man and just to listen to some of the stories that he could tell there may that is my favorite part of my job is that I see everything about a person and so there’s a level of trust that we need between each other.
Shahn Douglas 35:22
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Uri Vaknin 36:14
Very interesting. You see everything about a person, not? financially, in our previous podcasts, it was really about getting to know your buyer. Yeah, I know your buyer financial. I know you’re not allowed to say certain things to a third party. Unless you’re given permission. That is correct. And yes, and as a seller, it’s really important to me to know as much about my buyer as possible, correct? What’s the happy medium? Well, what I do is I actually have a conversation with the buyer up front that I’m if I’m allowed to express XYZ information to the seller, it will allow them to feel more comfortable. So if we run into a scenario where I need an extra week to close the loan, for some unforeseen reason, they’re going to be more open to to allowing that because we know we know the information, we know why it is happening, we don’t know, the seller just needs to know that there’s no major issues that are stopping it from closing, sometimes loans take a little bit longer to close. And so I have a conversation with them. And you know, 99% of the time they’re okay with divulging and I never go too far. It’s just general information about the quality of the loan and the progress of the loan, basically. Awesome. So, earlier, you use the term, Freddie Mac, and I don’t like to leave things. undiscussed Oh, yeah. Anyway, our viewers to have a question. And so what if I mean, obviously, no, Freddie Mac is good. But can you explain to me
Dino Schulatz 37:47
Yes, yes. So basically, Freddie and Fannie, Fannie Mae and Freddie Mac are essentially you can see them as the same thing, they have almost identical guidelines on but they have slightly different in certain certain areas. So they were both essentially saved by the government in 2008. And so they keep them both alive, because they’re used for slightly different purposes. Um, so in example, being as if there’s an self employed borrower that has owned a home, I mean, sorry, that has had a business operating for over five years, I can actually only use one year of tax returns to qualify that person if I use Freddie Mac, but I have to still, which the standard guideline is, is an average of two years of tax returns. So sometimes you need to navigate to one or the other based on the borrower’s situation. Got it. So let’s talk a little bit about this term. warrantable versus non warrantable condos. So you know, I know lenders like throw this term around, like it’s nothing but then when the buyers here seems scary, it sounds scary. Yeah, kind of freak out. And they call our agent say, why aren’t your warranty ball and you know, I can’t find a kind of there’s not warrantable you can yell back and forth, of course. So first of all, it’s probably the worst word to use. I mean, it just sounds too scary. It doesn’t it’s not as big of a deal is as they say, on but what it really means is that can I do Fannie Mae, Freddie Mac and FHA and VA financing or kantai and if I can, it is a warrantable building, if I cannot, it is is classified as non marketable, but that that’s not the end of the road, right? I have financing that is allowed on a non warrantable condo, but it is just a different type of financing. And our end goal is always to get toward to both. So if I have to do a mortgage with with the Bauer, say to put 20% down up front, in a non warrantable building in I am working to get the entire building warrantable the second that I do, I will go back to that borrower offer them over refinance most of the time, try to cover the cost of that refinance to help them so they don’t have to pay twice and get into the better financing. So, all that mean is, can I do Fannie Mae or kantai, that’s the simplest way to explain it. And it is it is you’re always looking to buy in a warrantable building. But if a building is non warrantable, it doesn’t mean, it doesn’t mean that you shouldn’t buy there, it just means that you should learn a little bit more about that building before making your decision. That’s God, oftentimes, when a building is not yet warrantable, there’s usually something that, you know, there’s a reason the seller oftentimes helps. Absolutely give incentives or sir absolutely, well, I mean, in your in your scenario, I mean, you you you do you handle it great, because the reason that you the jewel building, right, we are currently in a non warrantable phase for that building,
Uri Vaknin 40:54
although Juhl does have VA, but it does have VA financing so that but
Dino Schulatz 40:58
so it what that shows you is that it meets all of the guidelines, except for there’s one guideline that you guys still just own a few too many of the of the ohms in the building. So seems weird that you know, you you have to sell more in order to become, quote, warrantable. Order. You can’t it’s harder to sell. It’s a catch 22. It’s 22. Yeah, so always been the thing about Fannie Mae that’s driven me crazy. The VA has been awesome. And FHA historically has been easier, yes. But Fannie Mae says, Well, we won’t loan or we won’t buy the loans from loan originating bank until you’ve sold X amount of homes. And but you need that financing to sell more homes. Right? Yeah, exactly. So So I mean, what I love about what you’ve done is that, you know, if we have to do a non warrantable, you know, a type of mortgage, it is usually a slightly higher interest rate, because for a bank, I now have to hold that loan on my books, meaning you’re paying making payments to me, I can’t sell it to Fannie Mae, which is a much less risky situation for the bank, right. So more risky for the bank, higher interest rate for the client, less risky for the bank, you know, a lower interest rate. So what you have done a great job of doing is giving them more incentives to help offset maybe the HOA, so during the next year, while they have to be in this, in this loan that maybe has, I don’t know, $150, a month higher and mortgage payment, you’re covering a $400 Hoa for them for that entire year. So as long as I can get them out of that loan into that Fannie Mae loan before your incentives expire, they’re actually in a better situation right now. That’s why we do those incentives. Exactly. And we’ve explained it. And sometimes buyers don’t get it, they don’t and I have to, and actually, almost every single buyer you talk to initially is a little bit defensive to it. So I sit down and I actually run the numbers. And when you look at the actual numbers and the interest and in the situation, you know, nine times out of 10 or 19, out of 20. I they come they come over to my side and they understand that what I’m doing is it makes sense. And it puts it puts them in the best possible situation. Because believe me, we have options that you can spend extra cost to get down to that same rate or close to it as Fannie Mae. But there’s no real point in doing that. If you’re going to be refinancing any year, I would rather keep your first loan the least cost Li as possible. Right now the feds have said that they’re going to keep the interest rate low for the foreseeable future. They said they will not touch the rate so 2023 but that is what their they said they will not even think about moving rates up higher. So we have a we have a we have the lowest rates in that anybody alive today has seen right? And we have no intentions of moving them at least even looking at them till 2023. So I mean it’s looks to me as a perfect situation.
Shahn Douglas 44:14
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Uri Vaknin 45:09
So you know one of the great things about buying a condo that’s not warrantable. Yet, which is means that is big that is very important yet because it will be it will be that it’s different than never anybody you get to enjoy, typically great pricing and great incentive. Yes. I mean, at the Ogden, and at one Las Vegas, as soon as we got those financing approvals. Yep, we were able to increase price, deceleration of sales were amazing.
Dino Schulatz 45:39
And I would say that we are right at the exact moment. I mean, I’m under contract personally. And in one of your homes, as you know, I mean, condos, as you know. And the reason is, is I saw three other buildings do the same thing, right at this moment, right before Fannie Mae approval is, I think the best time to purchase the very best time to purchase because what will happen is we will you get in you get you get in at your price. And then Fannie Mae approval happens, and the back half of the building accelerates itself quickly. And that that that quickness of the sale drives up the prices, and you’re sitting back with a smile on your face watching the whole building, sell out and build an equity for you. Exactly, because you got the incentives, you got a great price, and now you’ve refinanced. And we know that interest rates are going to stay low for the foreseeable future. Absolutely. So the best of everything, and I actually haven’t even mentioned that part and what so if you enter into the with with the non war tool financing, I offer a refinance, where I will cover the cost of that refinance to get you into the Fannie Mae once what’s available. So you, you know, you’re taking a little bit of a leap of faith in the beginning. And your reward to that is much more incentives from the seller, right of the possibility of building in more equity, because you’re buying earlier in the building, and then and then you’re still the one negative of the financing. We’re taking care of that for you to get that to get, you know, back you back into that lower financing. So I really think that is the most opportune time to pull the trigger. Awesome. So Mike, you’ve been really quiet during on podcast. Do you have any questions?
Mark Bunton 47:17
Actually, no, I don’t. I’ve been listening to their pick up discussed and it was very thorough, and I think it covered just about everything.
Uri Vaknin 47:23
Awesome. Awesome. Well, that’s so Dino. So how do you deal with these buyers? who get these pre approvals for bank ABC, and then they come to our property? And, you know, their lenders notice the condo? ami don’t understand, you know, how they can’t use their approval? And this bang? Yep. at a specific property? Because it’s not yet Fannie Mae approved?
Dino Schulatz 47:49
Yeah, no, absolutely. You know, I’ve chosen I’ve tried a different a bunch of different ways in the beginning to reach people, but education, is it that’s it? You know, I mean, I sit down and spend time with them and teach them exactly what is going on in the building, I answer thorough months of questions, I actually end up being a very good neutral third party between the buyer and the seller, to just give knowledge about the building about the financing options, because obviously, when you have a selling agent, speaking to a buyer, there’s maybe some things that they just won’t say, you know what I mean? And so I have found that I am that bridge to help get those concerns out and answer those thoroughly, so that they don’t have any real questions by the end of it, and they understand what they’re doing. I don’t point people in a direction. I teach and educate, give that option and choose for themselves. So I’ve found that, you know, when we work together with buyers, yes, and where everyone is, like, divulging information, and being honest about the information honest what’s going on, if we can actually get the deal to close? Yes, absolutely. It’s when people pull back and information that you know, things always fall apart? Absolutely. The more the more you give me up front, on the better, the better we will be, the less information you give up, give me up front, something may came up come up in the future that that that causes difficulty, the best thing you can do with your lender is before thright and honest and have a real conversation and divulge everything that you can and then let the lender choose what to present in the mortgage transaction to get it closed. Because, um, you know, with how hard mortgages are dead putting too much information inside of a mortgage package is just as bad as not enough information sometimes. Well, that’s a whole nother podcast to go down exactly. Like applying for a mortgage and all of that. Yes, we are not going to cover all that today, but what it really wants you to do is really cover through the whole thing. concept of condo mortgage financing and really pull back the curtain on all of that, you know, we’ve discussed Fannie Mae, FHA, VA, you threw in Freddie Mac, you know, give us a call. We also talked about mortgage insurance. When was private mortgage insurance? We didn’t we didn’t cover that one mortgage insurance, private mortgage insurance is the same term. It just Yes, it just used up, you know, I say people can get confused sometimes, but it is the same exact thing. So what we did not discuss today are fixed rate mortgages, and that are that tertiary word.
Uri Vaknin 50:39
Rate Mortgage, have you done any adjustable rate mortgages recently?
Dino Schulatz 50:42
Yes, actually, and that is the perfect actual tool to use when we’re doing the non warrantable financing, that would then be refined into the warrantable financing. an arm product and adjustable rate mortgage is not a it’s not a bad product itself, it was used improperly prior to 2008, just like a reverse mortgage, that, you know, they have bad connotations to them, because of the way they were used that it is just a tool like any other tool, and we can easily use that product to give them a the lowest rate possible on a loan that we know we will not be in for a long time. And that’s the purpose of it. If you use a five, one arm, meaning it is it is over a 30 year period, but you only have on the fixed rate for the first five years before it starts to become adjustable. Well, then, as long as you’re going to be out of that mortgage about four or five years, what is the Harmon and being in that? Yeah, well, I take that lower interest rate, I think it makes sense, especially when you’re buying into a condo that is quote, non warrantable At that moment, and what Yes, and once you turn it warrantable, we go into a 30 year fixed 15 year fixed whatever type of fixed rate product you have with Fannie Mae, and that has an unlimited overpayment option. And and so and the your end product, I always would suggest being a fixed rate mortgage, anything you will be in for a lengthy period of time should be a fixed rate mortgage, especially right now where rates are but to use an adjustable rate as a tool to get there is a smart decision. If you look at it. Awesome.
Uri Vaknin 52:25
So if anyone hasn’t noticed, Dino is half Italian, he’s been talking with his hands the entire time. You may have heard him hit the table or hit paper a lot, because that’s the way he talks. But he’s passionate about what he does. And he has been an absolute great partner and this whole project that we’ve done, you know, the 1300 condos and five different kinds of communities in the past six years in Las Vegas, it’s been a wild ride, and the ride is not yet over. But you have truly, truly pulled back the curtain on financing for condominiums. And the whole purpose of you know, our podcast is to fully pull back every aspect of the curtain on the world of condominiums. So Dino Schulatz, Vice President, the Federal Savings Bank, why don’t you give a plug in give him your phone number again?
Dino Schulatz 53:26
Absolutely. Absolutely. Yeah, Dino Schulatz vice president of the Federal Savings Bank 630-300-8516. Again, 630-300-8516. I just want you to know that this is my passion. This is what I love to do. I work seven days a week used call that number anytime if you have any questions at all, and you are licensed in 50 states, I am licensed in all 50 states I can do residential and commercial loans. And you were in the country and you’ve done two mortgages for my sister. Yes, I have one in Georgia and one in Florida. Yes. And I believe it helped a couple of people on this podcast and he’s done my original mortgage this house and refinanced it and the only thing I can’t do is keep my hands in my in my pocket is all good.
Uri Vaknin 54:15
Well, thank you so much Dino. And this has been a great episode of Condo Artist, Condo Mortgage Financing. But as always, feel free to email us with any comments, questions or concerns. Again, I don’t know why I say concerns at condoartist, all one word @gmail.com Thank you very much, and we look forward to being with you on our next podcast. Thank you