What You Don’t Know About Renovation Loans • Learning With A Lender • Joel Schaub

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Welcome to the August episode of Learning With A Lender with Joel Schaub!

In this episode Joel Schaub partners with Christine, a renovation loan expert at Guaranteed Rate, to explain everything real estate brokers need to understand about these products. They get into detail about FHA 203k loans and how to use for both home improvement and home purchase. If you’re not familiar with renovation loans, you will be by the end of this episode!

Joel Schaub can be reached at joel@rate.com or 773.654.2049.

Joel Schaub


D.J. Paris 0:13
Hello and welcome to another episode of Keeping it real the largest podcast in the country made for real estate brokers by real estate brokers. My name is DJ Parris. I am your host and guide through the show today we have our monthly regular segment called Learn with a lender with Joel shop from guaranteed rate. If you’re not yet familiar with Joel, let me tell you a little bit about him. He is a vice president of lending at guaranteed rate. Joel has been doing loans at a high level since 2003. And it’s gotten to that level because of what he does directly for agents and their clients, which is he gives part of his commission back to the buyer on every transaction. Last year alone, he gave back over $271,000 in closing costs to buyers who worked with them and that put jewels value in the top 1/10 of 1%. nationwide. out of 380,000 loan officers in the country. Joel has been ranked number 181 year to date, he has closed 163 transactions for just under 58 million in closing. In the month of July alone, Joel’s close to 15 million, which exceeds the entire amount he did in the first quarter. And it’s not like the first quarter was slow. Joel is never slow. By the way, if you are looking for a lender, you really need to look no further. Joel is your is your person. He’s your guy. The his slogan is just called Joel because when you do, he actually will take such great care. You’ll never need to call anyone else. Here’s how to get in touch with Joel can be reached at Joel JL e l@rate.com. Or you can reach him on his phone which is 773-654-2049. So let us say hello to the biggest Cubs fan. I know Joel Schaub Good morning.

Joel Schaub 2:00
Hey, good morning, everybody. I really appreciate it. That warm introduction. All the accolades aside, it’s really about giving back. And I think today is going to be a really good show, because we have some knowledge that’s going to help the real estate agents actually close more transactions. And isn’t that what it’s about? We want to be able to provide some value. And I know that we have some great topics for today.

D.J. Paris 2:23
Great. Let’s get started. Oh, let’s

Joel Schaub 2:25
jump right into it. Right. And so here’s where we’re at. The market was strong. And I think right after the fourth of July, what we saw was a slight amount of this softening. And so what we want to do is help agents out there that maybe you have a property that’s in a perfect location, but it needs updating. We’ve seen this a lot, right? DJ, there’s properties that are great, but what is it you walk into? And there’s something wrong with it? Yeah, maybe it’s not the right kitchen, maybe literally as a big amount of space, and they want to do an addition. So I get phone calls all the time about can we do renovation loans, okay. And if you’re if you know anything about me, I don’t do anything unless I really know it. Right. I’m an expert in what I do. And on the call, I have an expert in all things renovation. So Christine, are you there? Good morning. Good morning. Christine, is part of my team, I want you to introduce yourself, tell everybody how long you’ve been with us and just in the business in general so that we get an understanding of what a true boss you are.

Christine 3:31
Great. Well, I started in the business in 1996. And I fell into a renovation situation about 2006. When that was the start of what we call the bubble, the housing bubble. Had a friend buying a property and the entire kitchen was missing for our real estate transactions where we’re encumbering a mortgage. You can’t get a mortgage if there’s no kitchen, because it’s not habitable. So that’s when the entry happened for me on how you could help people who could not pay cash for a home, get a kitchen to make it habitable. And that’s how it started. Was it about 2006 Since then, I’ve closed over a billion dollars and renovation loans, new construction, jumbo VA, you know, everything the gamut. We try to help people get into these homes that that needs some TLC or just need updating.

Joel Schaub 4:30
Christine literally done more renovation loans than anybody in the entire state that I know. And so the knowledge that she brings to these types of transactions because they’re not easy, DJ. It’s not something that you can just jump into with anybody who says, oh, yeah, I can also do renovation loans. You need an expert. Okay. And so on this call today we’re actually going to be able to identify several ways for the average real estate agent or even top real estate agents. How they can take advantage of some of these programs. Sound good? Sounds great.

D.J. Paris 5:04
And welcome, Christina.

Joel Schaub 5:06
It’s good. We’re so excited for. So Christine, tell me one of the typical situations that we have when a buyer comes to us. And we’ll start with probably the FHA, right, and it’s one of the two or 3k loan type of products that you offer. Just walk us through a typical situation that you’ve actually done. That has resulted in a big success.

Christine 5:28
For FHA 203. K, they offer two different programs, one’s more of a streamlined version for simple cosmetic updates. So how it will help the realtors is if they’re looking at a property, FHA has a little bit tighter restrictions on the appraisal process. And if they notice some things like maybe some, you know, crack windows, some GFI outlets, you know, not right, you know, maybe the biggest thing we see in a municipality, for example, Chicago is that the back porches need to be up to code if you’re buying a two, three or four unit, and those can run 20 to $30,000. And FHA is a low down payment at three and a half percent. So we’re able to help the realtors find financing to do these type of repairs to get the homeowner into the property. So those would be success stories is is getting, you know the buyers into the properties that need some repairs. Like if they’re missing kitchens, or bathrooms, or maybe they have water damage, we see a lot of foreclosures, that they don’t winterize properly, that may have some water damage from the roof leaking. That home is not financeable with a regular real estate mortgage, we would use one of our renovation programs to help the buyer obtain the property with a low down payment and give them a lot of money to fix it. You know, it can be 10,000, it can be 200,000. It just depends on what the buyer would like to do.

Joel Schaub 6:57
Let’s say it’s a $200,000. Let’s say it’s a $200,000 property. And it does need work. And I’m going in and buying my real estate agent saw several offers several listings that said cash only they think that it has to be cash. Is this something that FHA two or 3k loans will allow you to still finance even though it says cash only?

Christine 7:17
Yes, that’s I think a big misconception for some agents who maybe are not aware of renovation financing, if they walked into the property, and let’s say there is some water damage, and maybe, you know, the kitchen was removed for some reason, you know, if it’s a foreclosure and we have that a lot of agents will put cash only, and they’ll get pennies on the dollar for that type of listing versus a financed offer, which we would bring in a financed offer, which should be stronger, and allow the border repair the property. So I think there’s a big misconception that homes that are outdated or distressed, have to be cash only because it’s just not true. They are not aware of this program.

Joel Schaub 7:59
Now, DJ, have you seen agents come to you and ask you the same type of questions? How do you think this could help some of the agents that are on the Oh, yeah, I

D.J. Paris 8:06
think it just in particular, you know, removing some of the misinformation about renovation loans is huge. And I think you just provided a great service, because agents aren’t loan specialists, right? That’s not their job, and typically not what they’re best at. So you know, they need somebody like you and Christine to be able to, you know, set the record straight and just let them know what options are available, in particular with things that get a little bit more creative like this.

Joel Schaub 8:34
That’s beautiful. Christine, on that scenario here for $200,000. How much can they borrow? Is there a limit? Or is there a general guideline as to what the after repair costs? Walk us through what that looks like? Please?

Christine 8:48
Yeah, that is going to vary based on county. So if any, you know, one does have a question, we go off their county of website for FHA loan limit, for example, in Chicago, which is Cook County, that loan limit is around $365,700. So we would have to maintain that loan, with the client putting down three and a half percent. So in your example, if it was $200,000 purchase with 100,000 of repair, we’re fine because we’re below the loan limit. And they scale up. Our conventional program has typically higher loan limits. We have high balance locations, such as New York, Massachusetts, California, where loan limits can go almost up to 800,000 for single family, then we step up again into our jumbo renovation, new construction, where loan limits can go up to 2.5 million to 3 million depending on location. Because you do have some areas where in California, Alaska, Hawaii, New York, there’s there’s much more higher price points. So we’re able to really do the full gamut, you know, anywhere from 100,000 up to 3 million in the renovation and new construction that farm.

Joel Schaub 10:00
So I want to hit those loan amounts again. So for Cook County here, let’s just get the basis for some of these people on the podcast and really start to identify their people listening now that are out there helping buyers look at different properties. And so this is going to open up the door and I hope hopefully lead to them closing more transactions in the next quarter. So on FHA, I heard you say, just north of 365, and is that the full loan amount, they could not buy something at 365 and then borrow more under that scenario, right? Well,

Christine 10:34
they can always bring in the downpayment to make up the difference, if you bought something, just call it 350. And they needed 50,000, we could do that they would be required to put down $32,000 towards downpayment, but then we’ll give them 50,000 back. So it’s definitely case by case when we do some analysis, what would help for them, a situation where it might not work is if it’s a higher price property for 400,000, that needs 100,000. In that case, it probably would not make sense to do an FHA 203 K. And it also steps up depending on property type. So for example, single family is at 360,000. Whereas a two unit would be able to go to 471,100. And it will continue to step up three unit and four unit, the loan amounts go higher, the more units you’re buying. Conversely, do a conventional program, Joe, which we’re seeing that we’re having to use a little bit more, in Cook County, the loan limits 484,350, that’s almost $115,000 Higher, and can help more people with that loan amount.

Joel Schaub 11:45
That’s amazing. That’s real numbers that people could go out. Those are real numbers, that people could go out and start looking at properties and then put a plan in place so that they can acquire something in a great area that just needs renovation, and they most people think they have to come out of pocket, or that the renovation loans are tough, that they take six months. Let’s talk a little bit about that. It’s not your typical two or three week close, but but let people know that it’s not some month after month process, right? What is the typical timeframe on a closing that you guys are doing every single month

Christine 12:23
on a closing for cosmetic simple repair, we can do those between 45 and 60 days on a addition or major rehab, we definitely require 60 days. And the difference is the first 30 days is when you are vetting what we call your contractor and consultant information and maybe getting your architect plans. But typically, all of our loans are closing in 60 days on renovation.

Joel Schaub 12:50
It’s absolutely amazing. So let’s say it again, 60 days is what’s needed. They don’t need to have five and six months. And I have so many people come to me and think oh, I’ll never take an offer because it’s got a renovation loan. That’s simply not the case. Right? Yeah, we

D.J. Paris 13:05
should also mention to for the listeners who aren’t in the Chicagoland area, Joel, Christina and myself are however, guaranteed rate has loans all over the country. So even if you’re not local here, Joel can assist you, Christine can assist you as well. So definitely reach out to get those limits and information since it is county based and state based to reach out to find out what what those are in your area.

Joel Schaub 13:30
This is how big your reaches. I think I told you this last time when we were talking not on the podcast, but you have a nationwide reach I received a phone call just over two months ago. And he is in Boston, we closed a transaction for somebody who heard us on the air and was buying a investment property in well outside of Massachusetts. So that’s absolutely your reach. Bravo, DJ.

D.J. Paris 13:58
Well, I’ll tell you the reason the reach has grown as I would love to take credit for it. But it’s for all the guests we’ve had who had been so generous, including Joel and Christine, were really quite frankly, are too busy to do this. And yet they take time out. And you know, they do it out of the goodness of their hearts to educate people to provide value. And, you know, I know Joe very intimately as a friend and this is his whole life is about giving value. And everyone I’ve ever met a guaranteed rate is very much that same way. So this is why the reach I think is grown because these top producers we interview or people like Joel come on and say how can I help educate, and we’re just grateful that people listen.

Joel Schaub 14:41
Beautiful. Okay, Christine, tell us a little bit about some of the other scenarios that somebody on the podcast could really benefit from that. You can can share with us, please.

Christine 14:55
Yeah, I think on the real estate side for realtors, just having the education About this program can separate them in a real life example because I like to use these it really resonates with with our real estate brokers, we had a state sale where the parents had passed away. And there were four adult children, all with a realtor. I mean, I’m sure you’ve run into that DJ. So all four, brought in their realtors to say, you know, can you move our parents home, we need to sell it. The first three Realtors said, Oh, it’s outdated, you know, they’ve lived here 16 years and you’re talking about something close to the children’s heart, that’s where they grew up. So the first three Realtors came in with more of a maybe negative tone, like you know, it’s outdated, it’s going to take a lot to move it. And then one of Joe’s Realtors went in and said, Hey, we have this great program, we can show before and after photos, this is a great house, it has great guts, it needs some updating, but we have financing for it will be able to list it, you know, properly with a strong value. Instead of just giving it away and having a negative connotation. They spun it as a positive with this amazing financing. That realtor became, you know, the listing agent, they hired that realtor that that had the knowledge of the program. And they sold the property within 60 days using our platform, and our materials, which really helps, you know, put everything together for the realtor.

Joel Schaub 16:26
That’s amazing. So now. So now what we’ve seen as real life scenarios where agents on the podcasts that are listening can obtain a new listing, right instead of going in and saying, Oh, I don’t know how we’re ever going to sell this. I’m your person, we can get this listed, I’m going to make sure that one of our contexts at guaranteed rate, we’ll do the financing on the renovation loans. For any buyers that come in, we’ll create the marketing pieces that we set out at that open house. And let people know that it’s not a long process, and that they can do it. So now we’ve talked about how agents can get new listings, because they can have this in their back pocket. And we’ve also covered how buyers can go out and with their agents and actually acquire these properties. So if you’re a realtor that’s listening, these are two big things that can help us grow, because now you have somebody in your pocket that can help you close these transactions and open up a whole bunch of new transactions for

Christine 17:29
you. And Jill, just to add to that, on the realtor side, if you’re working with your buyer, sometimes there’s like certain school districts or they need to be close to their parents who might help with their kids, you know, maybe needing to be near work in a certain location. Sometimes the inventory is not that strong, where there’s a large selection. This allows them to maybe buy a property that needs updating or expansion in a specific school district or near their parents or near their job. And we can customize the home for them. Again, giving the realtors the insight to share this knowledge with their buyers and say, Hey, we can get you in the area. And you can update the house to how you want it since we’re not seeing exactly what you want. So it’s something for the realtors to keep in their back pocket for not only the listing side, but also on the buyer side.

Joel Schaub 18:20
Christine, does this also work on investment properties? Or does this buyer have to live in the property?

Christine 18:29
For a majority of our programs, they’re for owner occupied. We do mixed use for units through our FHA program. But they are all pretty much for every residence, the only Ester options we offer is for long term hold where let’s say an investor’s buying a property, wanting to update it and hold it for a couple years as a rental. We are allowed to do that on one unit property only like single family condo Townhome. Other than that we do not have investor properties for mix mixed units or for jumbo they don’t offer that at this time.

Joel Schaub 19:05
I could buy a house that I’m going to rent out and I could get a renovation loan. I just can’t get into this, renovate it and flip it right. We’re not that’s not our target market for any of those underwriting things. Right. That’s not the way it works. Okay. That’s a lot here, DJ questions for us.

D.J. Paris 19:26
Now, you know, my question is always thinking about the broker. You know, who should they be talking to about this? You know, with this respect to investor clients, you know, this is a conversation that really needs to originate from the realtor side and I think we just we just gave some really good talking points, but any ID any ideas about how they should reach this or broach this topic with their investor clients?

Joel Schaub 19:56
Well, Christine, you’ve probably seen this before, were they the age Doesn’t the agents, the one usually getting this brought to them by the buyer? They’re saying, Hey, can I do any renovation loans? And the agent goes? I don’t know. Right? And so this is the reason that being on the podcast and learning that yes, all you got to do, you know, just cultural, they will connect you with Christine. And we work as a team on all of these transactions. It’s not just that I hand it off to Christine, and that we’re not involved, we work hand in hand on all of these transactions, so that the buyers can go out there and look at places that they just never thought they could get into. So it’s a it’s a win win for the agent, because they’re going to be able to close more transactions, because they now know some of these little tips on how they can do renovation loans.

D.J. Paris 20:42
Perfect. You know, I’m interested in hearing your take Joel AND and OR Christine, on the recent news that just happened, I believe, this morning, where it was reported on by various news outlets that the Fed may be cutting, cutting rates, interest rates by a quarter of a point. Any thoughts on how that may or may not affect loan rates?

Joel Schaub 21:08
I’d love to talk about what that means and what it doesn’t mean, right? Because there’s a lot of misinformation about what a Fed cut does, to mortgage rates. Okay. So the day that the feds cut interest rates, they don’t call the mortgage companies and say, Please lower your rates today by this amount. Wouldn’t that be great? If it was so orchestrated that way, but that’s not what it is. Weeks and weeks have gone into this? This is DJ the, what we call on the floor here, the worst kept secret, right? We know that the feds are cutting rates, and they’re going to do it again at their December meeting. So six weeks ago, the traders priced in almost a 100% rate cut for today. That’s when rates dropped. That is why July, we’ve had more refinance activity and closing activity than I had in the first quarter of 2019. The rate cuts are here. The actual announcement today is just happenstance. Which is pretty cool, though. So what it does is it will be another way for your agents out there to have a talking point. So what does it do? Hey, did you hear that the feds cut rates reach back out to your lender now you should be able to qualify for more of a house and pay less on the same property. So it’s going to get buyers off the fence. So this is a great talking point for agents right now, tomorrow and in the weeks ahead. It’s going to be in the news Feds cut rates. What we know now based on what I just told you that the rate cut has been here. But it still means that rates today are lower than they’ve been in almost three and a half years, which is crazy.

D.J. Paris 22:54
I was looking that excuse me on average rates are about 100 basis points, which in layman’s terms is 1% less than it was November of last year even today?

Joel Schaub 23:05
You remember Anna? You’re exactly right. That’s a big drop.

D.J. Paris 23:10
Huge drop. So even if you aren’t working with any current buyers, but you have previous clients, what a great opportunity to call and say, Hey, I don’t you know, know your current mortgage situation. However, did you know that rates are much lower than they were even last year might be time to call your you know, your your loan officer. If you don’t have one? I’ve got somebody and obviously you can reach out to Joel.

Joel Schaub 23:34
Yeah, no matter what bank they talk to the rates are down right now, which is great. It doesn’t just have to be me your guaranteed rate. The banks right now on a 30 year fixed are down around 3.75 As of this morning and 3.25% this morning on a 15 year. So these are some talking points that you can say with your buyers, because they probably don’t know that for all of last year, all of 17 rates were in the fours and like you’d said in November, they were in the high fours even with 20 and 25%. Down the lowest rates were just below 5%. So we’ve seen a major move down where a 30 year fixed rate now has 3.75 on average.

D.J. Paris 24:18
And I can almost guarantee all of the brokers out there listening that your clients are not getting called by their their loan officer to tell them that you know, loan officers are too busy and it’s just not typically those calls aren’t made by many of them. And so here’s a golden opportunity for you to be a hero to your clients say hey, I know I already helped you purchase that home however, might be time to look for a refi another great reason to reach back out after the sale and keep that relationship and deepen it and continue to provide value. So huge.

Joel Schaub 24:50
I love that. Why don’t we like doing that? Isn’t that such a great thing. We’re all salespeople but what most people fall in this habit of is either not calling Little pasture your past clients at all? Or when you deal you’re asking them for business, Oh, do you know any friends or family? That could refer me? You know? No, they already know this, they would refer you. But if you call them with something of value, hey, just want to check in with the kids the house, hey, rates are down. Remember when we closed, I know that you had a rate in the fours, call your mortgage guy back, you know, remember, Jamel helped you close, I bet he didn’t get that rate down right now. And it means that there’s a lot of rates, if 375 is the best rate in the market, you can be a little bit higher than that with no fees, right. So if you have a rate right now, that’s at four and a half percent, and you could lower it to four, and not pay anything. That saves 10s of 1000s of dollars over the life of the loan for your average three or $400,000 loan, and you don’t have to pay any fees you can refinance. Typically, you’ll ask your banker, what’s the lowest rate in the market? And also what is the rate where you will cover all of my fees to refinance this mortgage? So I as a buyer, don’t need to pay anything. And then you can make the decision which one makes the most sense for your financial situation?

D.J. Paris 26:09
Wow, that’s a great place, I think to wrap up and by the way, everyone who’s listening who wants to speak to a loan officer like Joel and you should, because once you speak to him, you probably won’t need to ever speak to another loan officer. Joe, what’s the best way someone should reach out to you whether they’re a broker or client directly?

Joel Schaub 26:30
Yeah, email me directly. I really liked the communication and we could do the phone call as well. So I’ll start with email, which is just my name. It’s Joel JOE l@rate.com. So that is short for Joel at guaranteed rate. Even doctors and attorneys I always get people that misspell guaranteed. It’s like

D.J. Paris 26:48
that was a smart move. That was a smart move to make it the email simpler.

Joel Schaub 26:52
Jolin rate.com. And then 773-654-2049. And then with Christina on the phone, please do the same tell us the best way for you to connect with the folks on the call. And did we lose Christine,

D.J. Paris 27:12
we may have lost.

Joel Schaub 27:15
Tell them where you can be reached.

Christine 27:19
I can be reached at 773-848-4144 or Chris, Chris de like david@rate.com.

Joel Schaub 27:33
You’re awesome. This was really great. I really enjoyed what we covered today.

D.J. Paris 27:37
And thank you so much, Christine Angele on behalf of the listeners for taking time out of your two busy days to provide value to our 1000s of listeners. So I want to remind the listeners that please to support our show, we can do two things. One, give Joel a call whenever you have a client that needs a loan, whether it’s renovation loans, traditional mortgage, anything, reach out to him he will do his best along with Christine. So support our guests. And the second thing is to remember to tell a friend, right if you know other brokers in your area get we are nationwide. So there’s a huge pool that doesn’t yet know about our show, let them know pass this over every week we have on a top 1% producer and once a month we have on specialists like Joel to help you too. So on behalf of the listeners, Joe and Christine Thank you. And on behalf of Joel Christine, we thank you to the listeners for continuing to support our show, guys. We will see everyone on the next episode, which will be coming out shortly. Also Lastly, please join our Facebook page we post links to every single episode including as well as every Dr. Associate Producer Hanna sources, an article that will help you grow your business that we find online. So we try to provide value every single day of the week. Because we only do these episodes about once a week. So thank you if you are already a member of Facebook, if not the way to find us go to Facebook, just do a search for keeping it real podcast you’ll find us and also our website, we can stream every single episode keeping it real pod.com Oh, one more thing. You can also send in questions. Let us know your lender questions and we will pass those over to Joel and Christine and we will get those answered on a future episode right through our website or Facebook. Send us your questions and we’ll get to them. But anyway, Joel Christine, thank you so much. And we will see you both on receiving the next step. Which will be in a month. Thank you DJ.

Christine 29:35
Thanks DJ

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