Real Estate Revolution – What Buyers Need to Know About Financing in 2022

Last Updated June 14, 2022

Following on the heels of our last episode, we take a look at how the lending environment might change in 2022, interviewing local expert Brad Tawzer of Mortgage Express. How might federal interest rate hikes translate (or not translate) into mortgage rate increases? How will that affect the bottom line for buyers? And while interest rates are an important factor in determining affordability, what are the other puzzle pieces buyers need to put together in determining what they can afford and who they should work with as a lender?

Kip closes the show by outlining good reasons that buyers should strongly consider working with a local lender. Our theme lately has been “competition,” and obtaining local financing is becoming an increasingly important part of making a competitive offer. Find out why on this week’s Revolution!

Voiceover: 0:03

Ladies and gentlemen, strap on your seatbelts and hold on to your kombuchas. It’s time to get ready for the Real Estate Revolution.

Kip Lohr: 0:13

Well, I can tell you one thing I’m ready. Welcome to the Real Estate Revolution Podcast. I am Kip Lohr, your host with LOHR Real Estate, and I have in the studio today Ryan Neal from our Eugene office. Welcome back to the show. Ryan Neal. How are you today?

Ryan Neal: 0:29

I’m swell Kip. How are you?

Kip Lohr: 0:31

You know, I can’t complain. I’m really excited about this week’s topic. Last week, we were talking about how we’re in 2022, and what does that mean for people looking to buy or sell real estate in the our local markets of Bend/Redmond and Eugene/Springfield. We were talking about interest rates. We’re talking about inflation. We’re talking about inventory, buy low, sell high. Oh my gosh. Well, this week, we’re going to bring in a special guest from Mortgage Express. His name is Brad Tozer. And he is going to wow us with his local lending knowledge. But before we do that, I think we should probably get to this week’s market report. What do you think?

Ryan Neal: 1:11

Sounds good, Kip. So without further ado, here’s our weekly market update for Bend/Redmond and Eugene/Springfield. So through the first week of February, we’re seeing some pretty interesting numbers. We mentioned during our last episode that Bend’s market hasn’t exactly been cooling down, which is normally what would be happening this time of year. And as we’re seeing at the beginning of February, not only is it not cooling down, we’re actually seeing a ton of buying activity, and prices, at least on properties that have gone pending so far in February, are up an incredible amount. So in just the first week of February, we saw 70 homes go pending. That’s a higher volume than average for this time of year. And it’s all the more remarkable given Bend’s incredibly limited inventory right now. So today, which is February 7, there are only 127 properties currently active in Bend out of 120 or 125 residential properties. So, 50 homes, on the other hand, have been listed so far in February. That’s less than, you know, we’ve had pending sales. So that means inventory is crunching even further right now in Bend. Now this is a pretty limited sample size, and things should normalize somewhat from here. But there’s one other number that stands out from our numbers for the week. 34 homes have sold so far in Bend at a median price of $723,000. So that would represent 5% appreciation month-over-month. Again, it’s too early to draw conclusions, but we’ll be keeping an eye on things in Bend. If these trends do continue, 2022 could easily be a repeat of last year, when Bend’s market went up 26% year-over-year. Now in Redmond, the situation isn’t nearly as drastic. We’re seeing pending sales about on par with new listings and sale prices that are actually down a bit month over month. But we’ll be keeping track of things there too as the month progresses. So moving on to Eugene, through the first week of February, we have some relatively modest sales numbers. There were 28 of them at a median of $433,000. So that’s lower than last month’s median of $440,000. And again, we’ve got a small sample size here. So, you know, it’s nothing really to write home about, right. Pending sales tell a similar story. We’ve had 49 of them in Eugene so far in February with these homes listed a median of $384,000. So that number is pretty low. But let’s chalk it up at least at this point to coincidence. Prices do not appear to be falling in Eugene. At present, there were 109 residential properties currently on the market, and the median ask price for these properties is $492,000. That’s, you know, a lot higher than that $384,000 number. So what seems to be happening is that properties at the lower end of Eugene’s market are getting grabbed up. The buyers in the middle and upper ends of the market might be waiting until later in the season to really start shopping for homes. Meanwhile, we’re seeing listing activity that’s a bit more robust than buying activity. 62 new homes have come on the market. That’s compared, again, to 49 pending sales. So inventory is increasing slightly, but it’s still super low, though. So while Eugene isn’t seeing the same early buying rush that Bend is right now, it’s probably only a matter of time before buyers really start to hit the market. And, you know, inventory is still so tight here. There’s going to be a lot of competition. It’s pretty similar story right now in Springfield. There were slightly more listings there in the first week of February than pending sales, but again, inventory super tight. So that’s all for our weekly market update. Let’s move on to the main part of our show.

Kip Lohr: 5:19

Welcome back to the revolution. My name is Kip Lohr with LOHR Real Estate, and you are on the Real Estate Revolution podcast. And we are at the portion of our show where we’re going to bring in a guest today. And his name is Brad Tawzer, with <ortgage Express. He is a lender who has offices in the Bend/Redmond area and also the Eugene/Springfield area. And I’d like to say, welcome to the show, Brad.

Brad Tawzer: 5:44

Thanks for having me. Happy to be here.

Kip Lohr: 5:46

Great. So in our last weekly podcast, we kind of got into, you know, what’s going to happen in the real estate markets in 2022, both in the Bend/Redmond and Eugene/Springfield areas? And you know, the big, big question for people rolling into the New Year is, are interest rates going to go up? And are we going to see more homes become available? Am I going to be able to buy a house? And I thought I would bring you on the show today and, you know, talk about answering some of those questions in 2022 through the lenses of getting a mortgage, getting a loan to buy a home. There are a lot of people out there who are going to be looking to do that this year. And I thought you were going to be a perfect person to share some great information. I I can’t remember exactly, but how many years you’ve been in the business?

Brad Tawzer: 6:36

22 years? Ah, man, going on 23.

Kip Lohr: 6:40

Wow, okay, well, you you look like a young man every time I see you. So I can’t imagine you have been in that long. So, you know, I’ve got to get a little flattery out of the way. I promised you beers and flattery. So thanks again for coming on the show.

Brad Tawzer: 7:00

My pleasure.

Kip Lohr: 7:03

One of the big nationwide questions is, what are interest rates going to do this year? And, you know, people are reading about inflation going up, and the Fed’s got to pull its levers to get that under control, one of which is going to be raising, you know, rates. And you and I both know that it’s not that simple. And I thought maybe to start out, we would just talk about some of the levers that the Fed has to get inflation under control, and how pulling some of those levers might affect people’s ability to get a mortgage. And then we can just roll from there?

Brad Tawzer: 7:42

Well, to put it simply, the Fed tries to either raise interest rates or lower interest rates in order to either slow down the economy or speed the economy up. So, all they’re doing is trying to change the interest rate that affects what commercial banks borrow money for.

Kip Lohr: 8:03

Okay. And so when there’s this talk that rates could go up percent in three quarters or 2% at the Fed level, how does that trickle down to what you see rates doing this summer or in the fall? And maybe by the end of the year?

Brad Tawzer: 8:19

Yeah, that’s that’s always a tough, tough question to answer just just because it is something that kind of indirectly can affect mortgage rates. And mortgage interest rates are most closely tied to what would be referred to as the Treasury, but specifically to what’s called a mortgage backed security. And it really just depends upon the popularity of these securities to investors whether that will affect either the increase or decrease in mortgage interest rates. And historically, they are going to just automatically start to increase a little bit just as the home buying process increases as we go into the buying season in the spring.

Kip Lohr: 9:04

That makes sense. So like the stock market is kind of reacting to just even the talk of, slowing down the flow of money. The reaction happens before the actual action happens, right?

Brad Tawzer: 9:19

That’s correct. Yeah.

Kip Lohr: 9:20

So, you know, I think you and I were talking about this a few days ago, but there’s the buzzword of “interest rates” and how it affects people’s ability to qualify for a loan and what the affordability of borrowing money is right now. You know, they always tie it to the interest rate. And you and I both know that the picture is much broader than that. And there are many other things that go into people’s ability to qualify, and I thought it’d be interesting for you to kind of touch on a few of those things.

Brad Tawzer: 9:54

Well, really, it boils down to affordability, and what determines the affordability of homes in any particular area is what we refer to as the debt-income ratio. And so it’s not just about interest rates, it’s not just about the price of the home that you’re looking at. It really is, what are those numbers in relation to what your monthly income is and what your monthly expenses are. So we don’t ever really focus on, hey, what are current interest rates, because that’s only one determining factor.

Kip Lohr: 10:33

And so it’s easy to just jump on the interest rate and say, Well, you know, of course, I want to get the lowest interest rate. And that’s all I need to know. And so you know, having a professional who can guide you in the other elements of this decision-making process and be able to help you understand that, like, oh, there’s way more to know than just what your interest rates going to be. And there are a lot

Brad Tawzer: 10:56

It’s easy to talk about interest rates, because of other facets to it. that’s something that you feel that you know about. Because you’ve heard about that, then it makes sense to you. We can talk about that, but let’s talk about the other things that are affected throughout the process in order to make sure that you’re still making the correct decisions.

Kip Lohr: 11:18

Yeah. And what I tell people is that if the goal here is to purchase a home, then we need to focus in on how we can get you there. And, you know, the interest rate is part of that. But it’s only one small part.

Brad Tawzer: 11:36

Exactly.

Kip Lohr: 11:37

And so, to be able to understand all the other things that can become either a gateway to you being able to realize that goal or an impediment, you need somebody to take you through all that process.

Brad Tawzer: 11:50

Yeah, exactly.

Kip Lohr: 11:53

One of the things I find interesting is, you know, we get our clients set up with a lender such as yourself, and you qualify them, say, for a $500,000 purchase, or a purchase price of $500,000. And obviously, their down payment and whatnot can be different. But I find it interesting that folks think that now they’re going to go out and look at every $500,000 house out there as if they can buy just any $500,000 house. And that’s certainly not the case.

Brad Tawzer: 12:24

Well, each property is unique. Each property has its own special expenses, and that depends upon the property type. As an example, if you’re looking at a single-family residence, it may or may not have any homeowner association dues, right? If you were to look at a townhouse or condo, that is most likely going to have homeowners association dues. And so there are some townhouses and condos, for instance, where the amount of monthly homeowners association dues can equal, you know, almost $100,000 worth of buying power compared to a single-family residence.

Kip Lohr: 13:03

Right, which would be different depending on the amount of services that they’re providing, you know. I think what is difficult about that is that, you know, your front end and back end isn’t calculated based on your garbage bill and whatnot. A lot of these HOA fees include, you know, the property insurance, the hazard insurance and utilities and snow removal and yard maintenance. And so, you know, on one hand, a buyer may look at that and say, well, I’d have to spend that extra 200 bucks on these things anyway, so I should be able to afford the place, but from a qualifying standpoint, that doesn’t help them, right, it becomes a hindrance for them.

Brad Tawzer: 13:51

That’s correct.

Kip Lohr: 13:52

Well, so give me some other examples of things that you find are kind of the misnomers, that people come into your office and feel like they know what they’re getting themselves into, and then run into problems down the road.

Brad Tawzer: 14:07

Well, that really varies from from client to client. But I would say that the lending process isn’t as difficult as some may think, especially for first time homebuyers, because it’s a relatively simple process. And it’s just a matter of verifying, you know, income and assets. But the most important thing about having an initial consultation is just to make sure that there aren’t any questions that you may have or misconceptions that you may have and to just sit down and kind of talk through them. And I think that it would be a lot less scary process than you may think. But there is one thing that, you know, I try to make make clear, which is through the lens that the process is somewhat of a living organism, and guidelines will change, risk factors change. So as an example, as we’ve gone through the last 24 months, when we had some of the forbearance requirements. Well, automatically that’s going to change some lender requirements that have to do with whether you are currently in forbearance or not. And so, that is definitely something that would have changed, say, over this last short period of time, and it would have been different five or 10 years ago.

Kip Lohr: 15:37

Right. And it’s true, just like how each property has a life of its own, different qualifying factors come into play. For example, the taxes on your neighbor’s house and your house may be $1,000 different, or you like you said, you might have HOA fees or may not. But at the same time, when you’re out there as a borrower with your particular situation – I guess here’s a good one to throw out as an example. We’ve got people that because of COVID are now able to be remote workers permanently. And so you as a lender, you’ve got somebody who’s moving up from the Silicon Valley and their employment situation isn’t traditional, like if they’re working for Facebook. And if they’re moving to Bend, for instance, you’d be like, well, under normal circumstances, you’re going to have to purchase this as a second home. If you’re moving up here, how are you going to continue to work at Facebook. But now we’ve got a situation where people can work from anywhere in the country for many of these different companies, but they’ve got to be able to show that their companies are actually allowing them do that.

Brad Tawzer: 16:57

That’s a very good example. Because, you know, when you’re working at a brick-and-mortar company, anything outside of 65 miles of commute time is considered second home slash vacation home, just that was kind of the standard that we went by. And as you’re saying, now you can work remotely from anywhere, and so that requires just some additional documentation providing proof from your employer that you are able to work out of state remotely.

Kip Lohr: 17:30

Right. Right. You were mentioning to me the other day that lenders are starting to create some self-employment category. You know, back back in the day we had loans for folks that were self employed. And after the mass market crash in ’08, basically all of that became very difficult as far as qualifying people who were self-employed. So how is it for people who are self-employed these days as far as qualifying

Brad Tawzer: 18:07

Well, during the last couple of years, that for a mortgage? actually had become a little more difficult, again, for self-employed buyers. But here just just recently, over the last, you know, week, some of those requirements have loosened back back up from what they had to back to where they had initially been. So that has changed back. Over the last couple of years, you had many self-employed buyers having difficulty just because of so many small businesses struggling with with the lockdown. Yeah, it became difficult, again, for self-employed buyer to deal with some of the documentation. But some of those guidelines have just recently been been removed.

Kip Lohr: 18:56

So, it’s not quite stated income, like back in the day, but they’re getting more back in line with what they were doing maybe three or four years ago. Is that what you’re saying?

Brad Tawzer: 19:07

Yeah, and, you know, to kind of cover the stated income thing just just a little bit, because I know there has always been a little confusion about that. And basically stated income was just a self employed borrower or buyer being able to go off of their gross income rather than than their net. And that’s basically what a W-2 employee does, right? You’re able to qualify off of off your gross income and not, you know, after- tax amount and, yeah, that made things a little bit more difficult for sure for self- employed buyers over the last few years.

Kip Lohr: 19:44

So what is your recommendation to folks who are self-employed as far as getting more qualifiable if they, you know, take the time togive that some forethought and get ready to have the kind of documentation that they need to be able to qualify?

Brad Tawzer: 20:01

So that’s always difficult, because obviously, self-employed buyers are paying taxes basedupon their net income, which then can become what makes it difficult to qualify for a home home loan. So, they definitely want to talk to their tax professional to see what is the best plan of attack to thread that needle.

Kip Lohr: 20:27

Right. So in other words, if it doesn’t show up on your tax return, you don’t get credit for that income. So if you’re not paying taxes on it, you’re not going to, you’re not going to show it as income.

Brad Tawzer: 20:38

Exactly. So sometimes, you almost have to pay more in taxes in order to be where you need to be in order to qualify for the loan that you want to qualify for. So it just takes some pre-planning sometimes.

Kip Lohr: 20:56

Yeah, that makes sense. So before I let you go, one of the things that we do every week, in our show is a segment called Kip’s Tips. And for this week’s tip, I’m going to be talking about working with local lenders, and the importance of that in standing out in a multiple buyer situation. And so, I’m going to give my perspective on that a little bit later in the show. But I’d be interested to hear kind of your take as a lender on the importance that you see of working with a local lender, what the pros of working with a local lender are versus say, you know, one of the online lenders, the national lenders, where you’re not actually working with a person within, you know, your city or your state?

Brad Tawzer: 21:44

Well, as an example, just within, say, the state that we’re we’re calling from at the moment, there are differences, from county to county as far as expenses go. And unless you are familiar with some of these things, then some of those things can can be missed, and they can show up last-minute as a surprise. And so, there’s just no way for out-of-state lenders, for instance, or national lenders to know all these different idiosyncrasies. Say, for example, Washington County has what’s called a transfer tax. And if you’re calling to get a quote from an online lender to see how much money it’s going to cost you for closing there, 9 times out of 10, they’re going to miss that.

Kip Lohr: 22:36

Got it.

Brad Tawzer: 22:36

And so having a local lender, you’re going to assure yourself that all the things that you need to know are going to be known up-front and not become a surprise later on in the transaction.

Kip Lohr: 22:48

That makes sense. So what you’re saying is that you’re required to have a disclosure period at the beginning of the loan process and at the end of the loan process. And the beginning of the loan process is easier, because as you get to the end and you get to the close date, we often get jammed up right to the edge of that. And so if the numbers aren’t right, when that disclosure happens, it can, you know, force a transaction to not be able to close on time. Is that kind of one of the one of the things you’re talking about?

Brad Tawzer: 23:19

Or not close at all.

Kip Lohr: 23:22

Yeah, well, that’s not a good thing. What would be another compelling reason that you would put out there to work local versus, you know, like you say, the online or national lenders?

Brad Tawzer: 23:33

Well, no one can close a transaction on their own. Everything takes a group of people and teams. Knowing the local closing agents, for instance: it makes a big difference when you can be directly involved with the other people who are working on the transaction. And the main thing is being able to, you know, be available, not just a nine to five person, but also evenings and weekends, and it does make a difference. Because things do happen outside of your standard work hours.

Kip Lohr: 24:17

Yeah, bankers’ hours just don’t work anymore. None of us can work those, you know, and I agree with that 100%. And I would also throw out there that more often than I would like to admit, we end up getting into a situation where, you know right, you call in a marker where you say, man, can you really help me out on this one. We’re not going to be able to close on time, or we’re not gonna be able to close at all unless, you know, you can pull a rabbit out of the hat for me. And when there’s a relationship there, you can call in those markers and maybe get a You know, believe it or not, relationships do matter. And you deal done that wouldn’t get done otherwise with a company where there’s just no relationship there. You’re kind of on a conveyor belt, and you either go down the conveyor belt and, you know, close the loan, or you get stuck, or you fall off the conveyor belt and kind of nobody cares. know, the person who you’re working with, and you need some help, you know – they might not even pick up the phone. If you don’t know them, that’s just human nature, that’s the way it works. Yeah. And I always tell my clients, I like to know that I can walk into your office and pound my fists on your desk if if something’s going wrong, and kind of the other side of it is, you know, being able to have that proximity to really know what’s going on. So, I really appreciate you joining the show today. How do people get ahold of you, Brad, if they need to borrow some money to buy their dream home? How do they get ahold of you?

Brad Tawzer: 25:54

Very easily, my direct line 541-948-7295 can be reached at any time.

Kip Lohr: 26:04

Okay, and do you want to give out an email address so they can fill out an application?

Brad Tawzer: 26:10

Email address is [email protected]. Or just look me up on the web at Brad Tawzer.

Kip Lohr: 26:25

Well, I really appreciate you coming on the show today. And I think we’re gonna have to have you on again.

Brad Tawzer: 26:33

That would be fun. I appreciate it. All right.

Kip Lohr: 26:37

Well, you have a good one, Brad, and we’ll catch you next time. Yeah, thank you. Welcome back to The Real Estate Revolution Podcast. I am Kip Lohr, your host with LOHR Real Estate. And our final segment is some tips for buyers out there in the form of Kip’s Tips. Today’s tip is to use a local lender. Go local. And here are several reasons why you want to go local. First and foremost, you are going to be out there bidding with many, many other buyers for the same home, and how are you going to stand out in a crowd? Well, one of the ways you can stand out in the crowd is work with a local lender who will instill the confidence that you can get the job done. A lot of times with the online and national lenders, they just aren’t there to answer questions, they are hard to get ahold of, and they may be working bankers’ hours of Monday through Friday 9 to 5, and you need somebody who is going to be in your corner who is going to be reachable and is known locally for getting the job done. So, accountability – you want somebody who if something’s going off the rails a little bit, they are going to make sure that they are going to get it back on track for you because of the relationships that they have with the community. Local know-how – they’re going to be able to understand the local taxes and fees that are associated with the particular city or county that you live in. To make sure that you know that at the end of the day there aren’t going to be any last-minute number issues as far as how much you need to come into closing with fees and whatnot. Communication: they’re going to be available to pick up the phone, and you know that they’re going to be there for you. And finally, you need to have the confidence that somebody is working in your corner and has relationships with the community and with other agents in town. There you have it. See you next week.

Voiceover: 29:04

Thank you for joining the Revolution. We are over and out until next week, when we’ll continue to fill you in on all that matters most in our local Bend and Eugene real estate. See you next time on The Real Estate Revolution.