Why Rate Locks Matter & How Physicians Can Build Wealth Through Real Estate

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:: 00:00

Sean Shallis, Your Mgt Guy: Yeah.

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Sean Shallis, Your Mgt Guy: hey, welcome back to the loan officer, podcast where we believe that doctors deserve better deals. So today, you know, I just had a quick thing. I was actually working through some of the questions that I was going through yesterday with a couple of our borrowers, and one of the physicians is really smart, Guy, and said, Hey, you know, I just looked at my paperwork. And why is the rate right now? 6.8 7 5, and national rates are 6.7 5.

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:: 00:34

Sean Shallis, Your Mgt Guy: So 1st of all, this particular physician, he's actually purchasing a home that's being constructed. It's going to take 4 or 5 months before it's finished. So one of the things I did is the 1st thing I said is, hey? Great question. Number one. If you have a question. Don't be afraid to ask. Always put it in the notes. Send me an email. Call me text me whatever you need.

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:: 00:51

Sean Shallis, Your Mgt Guy: But you know one of the 1st things I said to him is, you know, right now your rate is just a placeholder. We haven't locked your rate because it wouldn't be a good idea to lock it, because we're anticipating that going into the market that we're going into and based on what we heard yesterday at the Fed and some other things. We feel as though rates are probably going to trend down a little bit. So for me to lock a rate the longer the duration on the rate lock, the more expensive it becomes for the customer.

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:: 01:16

Sean Shallis, Your Mgt Guy: So a real, you know, that's the difference between us and those people. Just slinging loans is what I like to say. You know, when you have somebody who's a strategist, they understand the market. We can actually, we're not forecasting the market, but at the same time it's just some common sense goes into play there, and being able to watch the market like a hawk.

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:: 01:33

Sean Shallis, Your Mgt Guy: it enables you to see the differences in the fluctuations in the market, and after doing this for 30 years, it almost becomes a little bit easier to predict some of that stuff that's going to happen. So my recommendation was, instead of paying more for a longer rate lock

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:: 01:47

Sean Shallis, Your Mgt Guy: just for insurance. Let's let's ride out the market a little bit. We'll keep an eye on it, and if the market looks like it's going to take off in the upward direction. I'm going to call up the doc, and I'm going to say, Hey, you know what? Let's lock your rate with a 90 day rate lock or 120 day rate lock, pay a little bit extra, but be ensured that we're not going to miss an opportunity.

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:: 02:05

Sean Shallis, Your Mgt Guy: So that that's part one. And you know, 1st of all. What is a rate lock when you get a mortgage on a house, and you come to me to get a mortgage. And you say, Hey, I got 45 days before I can close.

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:: 02:15

Sean Shallis, Your Mgt Guy: I'm going to say, Okay, in that 45 day period, I'm going to walk your interest rates so that you're protected so that interest rates float with the 10 Year Treasury Market. They're also very susceptible to whatever's going on in the economy.

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:: 02:27

Sean Shallis, Your Mgt Guy: So if there's fluctuations in the market right now, and if there's stuff going on, the economy like tariffs and all that other stuff, there's a good chance that the market is going to fluctuate, and the rates are going to fluctuate. So one of the ways that we protect our borrowers is we're going to lock your interest rate. We can lock for 45 days, 60 days, 90 days, 120, even 360 days.

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:: 02:45

Sean Shallis, Your Mgt Guy: The difference is, though, is is that as you go further out, the rate lock becomes more and more expensive. So it's important that you have a professional like me that can actually determine. Hey? Is it a good time to walk or not? And then we'll go through those, and we'll go through those scenarios together, and thank God, most of the physicians that I deal with

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:: 03:03

Sean Shallis, Your Mgt Guy: super smart people. Once I explain it, once they really get it, and then, as we move forward, they can understand it. And now you'll understand why, you know. Dr. V. Actually came with this question, and he said, You know, why is my rate 6.8 7 5, and the national rate I see out on the Internet is 6.7.

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:: 03:21

Sean Shallis, Your Mgt Guy: So 1st of all, again, the rate that we put in the loan for now and his documents just to get it just to get it underwritten. It's just a placeholder. It's not locked in. We're just putting it there for now, and it turns out that when I lock that when I put that rate on there

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:: 03:36

Sean Shallis, Your Mgt Guy: it was. It was literally 2 days before. And so now what what happens is is that

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:: 03:42

Sean Shallis, Your Mgt Guy: we actually put a rate in there, and that that rate yesterday was 8. I'm sorry. The day before was 8.7 5

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:: 03:48

Sean Shallis, Your Mgt Guy: the fed came out. They said, Hey, you know what? On Wednesday yesterday they had their announcement. At 2 o'clock PAL, Chairman Powell came out. He said. Hey, you know, we're not gonna change any rates. We don't expect to right now. We are hedging against. And they were telegraphing that they're probably gonna do a rate lock change. I'm sorry. A rate change somewhere in in June, July, September, somewhere in there. So we're gonna start to look for that we're gonna watch that. But because that potential rate lock, you know, why are they?

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:: 04:17

Sean Shallis, Your Mgt Guy: Because that protection rate change, why would they bring rates down is because they're worried about 2 things. The fed chairman also, you know, there are 2 mandates for the fed. The 1st mandate is inflation to guard against inflation, which you've probably heard a lot about, and the other thing is is unemployment, and those are the 2 mandates that they have. What's interesting is.

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:: 04:36

Sean Shallis, Your Mgt Guy: even though the housing market is very heavily dictated on what the fed chairman is talking about, what interest rates are doing, or 10 year treasuries for real is really what we're looking at.

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:: 04:48

Sean Shallis, Your Mgt Guy: Interestingly enough, Chairman Powell won't actually talk about housing that much because it's really not in his lane. What he does does affect it. But he doesn't have a lot of control over it. It's just a matter. One is a function of the other. So, interestingly enough, as we, you know, as we move forward, and we listen to him the other day.

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:: 05:21

Sean Shallis, Your Mgt Guy: So as we listen to him the other day, you know, if we're looking at a possibility of a recession or something like that, and I know recession is a bad word on Wall Street, but you know the bottom line is when the work. Recession comes in or inflation comes in. People start to flock toward bonds, oil, gold, because they equate that with security. The other thing that happens is, they look at bonds, and they look at specifically 10 Year Treasury bonds, and when that happens, demand for treasuries go up

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:: 05:47

Sean Shallis, Your Mgt Guy: every day. There's an auction for 10 Year Treasury Bonds, and when that demand goes up, and when people get nervous they start to go to the they start to flock to our 10 Year Treasury Bonds.

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:: 05:56

Sean Shallis, Your Mgt Guy: and when that demand goes up, what's going to happen is is that the prices? You know prices of interest rates are going to slide down a little bit, and it's just one as a function of the other. We did give him an image to show him that, hey? You know. Listen. 10 year treasuries actually slid down a little bit, which means that the at the auction there's more people buying them which is going to also in turn. If the if the 10 year Treasury yield comes down, so do interest rates. You know the market is going to assume

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:: 06:23

Sean Shallis, Your Mgt Guy: that if we're if we're anticipating possibility of inflation or tariffs. They're going to guard against that. And they're going to be more conservative. Obviously, so hopefully, this makes sense is, you know, obviously I'm not an economist. I don't have an Mba or you know, but I do have 3 decades of experience in the in the

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:: 06:42

Sean Shallis, Your Mgt Guy: early 2 thousands. I was the guy on Wall Street that they would call I was what they call a real estate strategist, and I would be on the Bloomberg News Bloomberg Radio. I was on Cnbc. I was in the Wall Street Journal, New York Times, a bunch of different places.

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:: 06:57

Sean Shallis, Your Mgt Guy: and I wasn't there because I had some pedigree degree. I was there because I had boots on the ground. I had experience working with the borrowers and seeing what they were saying or what they were doing. So when you're working with me, you're not just getting another guy who's going to give you a loan and give you rates and give you service.

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:: 07:12

Sean Shallis, Your Mgt Guy: You're getting somebody with 30 years of experience that actually has been in the trenches. I've helped 2,000 people buy, sell, or invest in a home, and about 30 or 40% of those were high net worth individuals like yourselves that are looking for an expert to advise them long term. We're not looking to just give you a loan and run away.

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:: 07:30

Sean Shallis, Your Mgt Guy: I say it all the time. Anytime you have somebody that gives you service, and after they give you service they disappear. There's a problem with that. We're running toward our customers, not away from our customers, as evidenced by giving you this information and putting it out there for you, you know. The other thing is, is that why was there a slight fluctuation between?

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:: 07:48

Sean Shallis, Your Mgt Guy: What is the interest rate that you might see advertised. And when you look at a physician loan well, 1st of all, a lot of the physician loans that we're doing are in the 1 million dollar plus range. The second thing is that a physician loans are considered to be a portfolio product, because what the bank is typically doing is waiving the Pmi insurance. If you remember that right, that's 1 of the benefits. So they waive what's called primary mortgage. I'm sorry. Principal mortgage insurance, and what that is.

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:: 08:17

Sean Shallis, Your Mgt Guy: What they're waiving is what's called Pmi, which is private mortgage insurance. What that insurance is. It's to cover the gap between the 10%. And the 20% that Fannie, Freddie and Ginny Mack would look for in a conventional loan. And if you don't have 20%, they require that you have private mortgage insurance to cover the risk.

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:: 08:37

Sean Shallis, Your Mgt Guy: So

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:: 08:39

Sean Shallis, Your Mgt Guy: when we're giving you a loan and we're saying, Hey, we're gonna waive that Pmi insurance or that private mortgage insurance.

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:: 08:45

Sean Shallis, Your Mgt Guy: We're also going to have to portfolio that loan and keep that on our books. And that's why, typically, when you go for a physician loan. You want to go to a depository bank. We're one of the, you know. I work for the 5th largest bank in the United States. We're one of the 10 or 12 depository banks still in the market. People say, what is the difference between you and everybody else? And I go, you know. Have you ever seen the movie Jim with? It's a wonderful life with Jimmy Stewart, and he takes the money from the cab driver and he gives it to the guy who owns the restaurant to buy his house and build his house.

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:: 09:13

Sean Shallis, Your Mgt Guy: I'm like Jimmy Stewart. We're basically we're not in the business of just slinging loans. We're in the business of actually depositors. And we're me specifically, I'm a depositor. High net worth depositors. And what we're looking for is solid depositors that we can have a relationship for decades, not just to give you a loan. So again, when we do that loan, at least in my company, we're going to portfolio that loan. We're going to put it on our books, and we're going to keep it on our books, and we're going to service it for you. We're not going to sell the loan the day after it closes.

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:: 09:42

Sean Shallis, Your Mgt Guy: In most cases. The banks that are going to do. Physician loans are going to hold the loan, and that's why you don't see a lot of brokers doing them.

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:: 09:51

Sean Shallis, Your Mgt Guy: And, unlike, you know, unlike banks and other financial institutions when we're not. We're not reselling that loan. We're servicing it. So it's somebody from my company calling you. And then, when you're working with me

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:: 10:01

Sean Shallis, Your Mgt Guy: specifically, I'm going to follow up you every 90 days and say, Hey, Doc, how's it going? How's the family? Are you playing playing golf, you playing pickleball? Has the kids? Are you looking to do anything like? Are you looking to do anything in your in your real estate? Are you looking at? Are your kids going to go to college. Do you need to do a cash out refinance? Do we need to look at an equity line or something that can help you to make the financial ease easier for you.

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:: 10:24

Sean Shallis, Your Mgt Guy: So in many cases we're following up with you every 90 days, people say, Well, what if the rate changes, or how do I? If I take a 7, 1 arm, which is an adjustable rate mortgage, it's fixed for 7 years and adjust in year 7. By the way, I'll say this twice. You do not want to be in a 7, 1 arm in year, 7 or a 5 1 arm. You don't want to be in that loan at the end of the maturity of the loan.

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:: 10:45

Sean Shallis, Your Mgt Guy: If you have an adjustable rate mortgage, you do not want to be in that loan after the maturity date. Those loans are designed for either a short term, use short term duration, or, if you're speculating a little bit on the market, and you expect the interest rates to come down over time, and you want to be a little more aggressive, you can actually save about a half a percent on the rate, and that's usually about the difference between a 30 year fixed rate and a, you know. Let's call it a 7. 1 arm for argument's sake.

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:: 11:12

Sean Shallis, Your Mgt Guy: Interestingly enough, though people say, Well, what if I what if I forget when you're working with me? And I'm I'm actually going to be calling you every 90 days, whether you want to or not. Like Green on a pickle. It's just my process. I'm going to call you, and I feel obligated to call you and say, Hey, how's it going? I want to check in with you every night and say, Hey, you know what either we could save you some money on your loan by refinancing, or let's just stay the course right now. It doesn't make sense to refinance. You're doing great. Keep going on the same path.

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:: 11:37

Sean Shallis, Your Mgt Guy: So you know, one of the other things is, you know.

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:: 11:57

Sean Shallis, Your Mgt Guy: So let's just touch on refinancing first, st you know, one of the huge advantages of you know, working with the bank directly, and the opportunity presents itself is if we can actually save you money on a refinance. What's interesting is we already service your loan. We want to keep you as a customer and a depositor. So we're going to do that refinance for almost at nothing. But if you have a company that actually resold the loan, and the day they wrote the loan they give you a great deal, and they resold it to another company

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:: 12:25

Sean Shallis, Your Mgt Guy: that company didn't get paid on the way in when they did your loan, and when they did the 1st loan. So they're going to want to get paid on the way out when they do the refinance, and they're going to charge you, and they're going to probably charge you a pretty hefty amount, because they now have you? And they're servicing that loan. They're going to look to get paid again on the way back out. So you know, the bottom line is, you know.

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:: 12:45

Sean Shallis, Your Mgt Guy: the fed is actually telegraphing of potential rate cuts in in, you know, in, I'm going to say, in the summer to early fall. If that actually happens, it's going to be a great opportunity to reduce rates. So what we're going to do is in this particular case, we're going to hold the path. We're going to keep our eye on the market, and we're going to see if it makes sense to lock the rate any sooner. But for right now we're going to stay the course with Dr. V.

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:: 13:12

Sean Shallis, Your Mgt Guy: In in other cases we may, you know, if you say to me, Hey, I'm gonna be. I'm gonna be close. I want to close at 30 days. We can handle that for you. We can actually do anything up to about 2 to 3 weeks we can get you in a market into a loan and close

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:: 13:24

Sean Shallis, Your Mgt Guy: so again, you know.

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Sean Shallis, Your Mgt Guy: are we? Are we heading for whatever market we're heading for. Here's here's the last thing to think about.

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:: 13:33

Sean Shallis, Your Mgt Guy: I call this the American dream. Most people don't understand the value of, and why they called it the American dream.

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Sean Shallis, Your Mgt Guy: you know. Years ago.

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:: 13:43

Sean Shallis, Your Mgt Guy: There was there was. People are coming out of, you know, coming out of Vietnam. They're coming out of different wars and stuff like that. And they came home. They they really couldn't afford.

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:: 13:54

Sean Shallis, Your Mgt Guy: So one of the things about, you know, one of the things I want to just point out is the American dream one is, when is now a good time to buy a home.

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:: 14:01

Sean Shallis, Your Mgt Guy: you know, and people always say to me. I'm waiting on the market

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:: 14:04

Sean Shallis, Your Mgt Guy: number one, do not, I would be. Do not try to time the market in the real estate business. It's an inefficient market different than Wall Street.

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:: 14:12

Sean Shallis, Your Mgt Guy: The real estate market is an inefficient market. If something's gonna happen in the market and it starts to change today, you don't see the repercussions of that for 3 months.

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:: 14:21

Sean Shallis, Your Mgt Guy: And you know there's opportunities to be had in an inefficient market. But there's also things that you have to be careful of, and what I'm going to say is is that instead of timing the market, take what we know.

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:: 14:34

Sean Shallis, Your Mgt Guy: So what do we know? Let's say, for argument's sake, you're paying $3,000 a month for 12 months. That's $36,000 for rent, and you know you've been renting for 5 years. So 36,000 times 5 years, $180,000. So most of the people listening to us, you're really smart people. What's 180,000 times 0.

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:: 14:54

Sean Shallis, Your Mgt Guy: Well, that's obvious. Sean is 0 right? Right? But if you had invested that money, and in the United States, if you purchase a home right now

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:: 15:02

Sean Shallis, Your Mgt Guy: you could write off all the interest that you pay on interest on a loan for purchasing a home. That's right. All the interest that you pay on a loan, and in the 1st 3 to 5 years the bank wants their money back first.st So 98% of the payment is interest on a loan.

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:: 15:17

Sean Shallis, Your Mgt Guy: and then you can also write off up to $10,000

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Sean Shallis, Your Mgt Guy: on any money paid toward property taxes.

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:: 15:24

Sean Shallis, Your Mgt Guy: so that $10,000 up to $10,000. So if assuming that you're a physician and assuming you're at the 38% tax bracket, which, if you make enough money to purchase a home. You're probably at the 38% tax bracket.

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:: 15:36

Sean Shallis, Your Mgt Guy: Assuming that you're at a 38% tax bracket. What's interestingly enough, is is that

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:: 15:42

Sean Shallis, Your Mgt Guy: if you took that $3,000 and you invested it in a mortgage and interest on a loan.

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:: 15:48

Sean Shallis, Your Mgt Guy: you would get back from Uncle Sam, about $900 a month from your tax benefit. That's right, because you're going to get back 38% of the money that you invested in that home. That's why they call it the American Dream. You know they designed it for you to invest in our country and invest in yourself.

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:: 16:03

Sean Shallis, Your Mgt Guy: You can't get a better investment than purchasing a home right now, if you can find another investment that gets 38% with little to no risk, and you get to live in it and watch it grow. I mean, there is no other. There is no other way that I know of to do it, and that's why I'm so hypersensitive to, you know, believing in the American dream. It's still alive.

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:: 16:24

Sean Shallis, Your Mgt Guy: You know, so trying to time. The market may not be the best thing I'll give you. One other scenario is, you know, one of my physicians said, Hey, I'm going to do my residency in Boston. I'm going to be there for probably 2 to 3 years. I don't know if I want to, you know, rent or I want to buy. And I, when I explained the benefits of purchasing a home, and I said, You know, let me ask you a question when you leave. Do you think another doctor is going to come in?

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:: 16:46

Sean Shallis, Your Mgt Guy: And he said, Yeah, of course. And I said, Let's say he's not as smart as you, and he doesn't buy the house.

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Sean Shallis, Your Mgt Guy: Do you think you can rent them your place and get paid and create and and keep it as an investment? And they were like, Wow, yeah, I guess I could, and he said, You know. And I said, Well, when you become a full partner and you become a surgeon.

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:: 17:04

Sean Shallis, Your Mgt Guy: do you think you may have some extra money to be able to purchase your next home? And he said, Yeah, I said, Well, what if we? What if you didn't? He said, Well, then what do I do? I need to sell that house, I said. No, what we'll do is we'll do a cash out refinance. We'll take some of the equity out of that house on the one that you save money on while you were living there, instead of renting. And we're going to take that equity from the appreciation of the House assuming it appreciates, on average.

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:: 17:25

Sean Shallis, Your Mgt Guy: in the United States the average real estate appreciation was 8% from, except for 2 times. In 1938 we had double digits where the real estate market went down, and in 2,008 we had double digits. When the real estate market went down.

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Sean Shallis, Your Mgt Guy: Oddly enough, over a hundred year period. Outside of those 2 times.

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Sean Shallis, Your Mgt Guy: average real estate was 5 to 7%

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:: 17:47

Sean Shallis, Your Mgt Guy: a year. Okay, so if real estate has gone up that much, obviously, if the property, if you're there for 3 years and you buy a $300,000 house, it goes up 3 years of 5%. That's 15%.

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:: 17:58

Sean Shallis, Your Mgt Guy: 15% is $45,000.

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:: 18:00

Sean Shallis, Your Mgt Guy: Believe it or not that you can. You can buy a home with 10% down. Remember, no Pmi insurance as a physician. So we can actually, if we needed to, we could take the equity out of that house and apply it to the next house.

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:: 18:12

Sean Shallis, Your Mgt Guy: and you can continue to rent the house that you had, and purchase your new home.

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:: 18:16

Sean Shallis, Your Mgt Guy: There are so many ways for us to help you to build wealth in real estate, especially as a physician. I want to help you. I believe in my heart and my soul that physicians deserve better deals. I want to be your guide. I want to be your loan, doctor. Give me a chance.

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:: 18:31

Sean Shallis, Your Mgt Guy: We'll see on the other side. Hey? If you want to find out more about your situation, or you want to get qualified, or you want to get what I call success ready and Pre-approved is what some people will call it. Just give me a call, grab the link below, share this with other people, share it on a blog post. If you want to subscribe, I'm also available. If you are a physician expert and you're in the industry. But you're not a doctor, and you want us to come on our podcast or we want to be a guest on your podcast I'm more than happy to talk about.

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:: 18:57

Sean Shallis, Your Mgt Guy: we'll see on the other side. Sean Charles Loan, Doctor Aka, the real estate Real estate Loan Doctor

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:: 19:03

Sean Shallis, Your Mgt Guy: Sean Charles Aka, the loan doctor. I work at the 5th largest bank in the United States. I'm a top producing loan officer, and we actually provide this service. We can help you. We can help you with a loan or a mortgage or refinancing any one of the 50 States in the United States, and I'd love to help you to get the best deal possible. You deserve it. We'll see you on the other side, Doc.