A path to financial transparency and home ownership. Read this transcript of Joe's radio interview and learn how Mortgage Coach helps you get the best information for your home mortgage.
Speaker 1: We now return to Sunday Magazine on Y108.
Andrew: Welcome to Sunday Magazine. I'm your host for this weekend, Andrew Fillipponi. On the hotline we have our guest, his name is Joe Puthur and we're very excited to have him. Good morning, Joe.
Joe Puthur: Good morning Andrew, thanks so much for having me.
Andrew: Give me a little background about yourself here. I'm looking over your bio and I see that you're a younger guy, right? You're under 40, that's cool.
Joe Puthur: That's right, that's right.
Andrew: You have been working ... Well, tell us what field you've been working in for the last few years.
Joe Puthur: Sure. Well, I've been focusing on innovating homeownership accessibility because we think that families across the country, and specifically in communities like yours, that homeownership represents an important part of a financial plan.
In my history, I've been creating software for financial services for nearly 20 years. I started my first firm right out of high school and I've been innovating for the space from that period. Sold a company called Lasso Technologies to a firm called Ellie Mae back in 2005, and we really set the precedent for what it meant to bring mortgage services to the internet in terms of helping banks provide that service to customers, no matter where they are at any point and time. Now I'm focused on the education the customers need to make a confident mortgage decision, no matter what lender they select.
Andrew: What's the housing market look like right now?
Joe Puthur: The housing market is exciting, because accessibility to homeownership is actually more there than I think most people in communities actually realize. You do have inventory challenges a lot of times for the properties that are most important, folks that are trying to get started or first-time homebuyers because builders today are unfortunately not incentivized to build starter homes.
That being said, there are a lot of programs that customers today and people that I talk to just don't know about, that allow you to take homes in many great areas and make them even better to align with the type of environment to have for your family. You might find that there's parks and services and schools that really align with your goals, but maybe that home is missing a bathroom or it's one bedroom short.
There's home renovation loans, things like a 203K loan, that will allow you to make those improvements affordably as part of the mortgage. When you look at people getting out of the rental trap, this repeat of not creating wealth through their home, you see them doing so just based on misinformation like not knowing about the program I just shared.
Andrew: Yeah, that's a good point. I think for most people there's a recognition or understanding that when you buy a home, it's probably the biggest investment you'll make, but not a lot of people research it and do their homework on it. Joe, where should people start? If I am going to be a first-time homeowner or first-time homebuyer, where should this process begin?
Joe Puthur: First of all, I mean you live in, again it's everything a community to have so many great brands, whether it's community banks, whether it's large banks, whether it's the independent mortgage originators and bankers that service your communities in general, you have a lot of wonderful professionals that I've met throughout my career.
We're agnostic in terms of professionals from all parts of mortgage banking turn to Mortgage Coach. About 4% of originators in the country depend on my technology everyday. About 35% of the top producers, the top 1,200 folks, use Mortgage Coach in every conversation. Why that's important is whether you're using somebody that's leveraged my innovation yet or not, you need somebody who's providing you education and advice.
If you are going through the mortgage experience with anyone at any point, I mean if you're going to go out with a realtor, they generally ask do you have a pre-approval, do you have a pre-qualification. The customer in your case is going to have to talk to somebody about the loan and if that conversation was focused on rate and payment, if that conversation was focused on the price of the loan, then you're likely not talking to the right person.
Because the conversation that the modern mortgage that today's customer, whether a millennial and young or you've done the mortgage 10 times and this is an investment property or a second home in sunny Florida, it really doesn't matter. You need to be provided transparency in the mortgage conversation. That means visual aid, graphs and charts, not just tables. That means that you need to be shown things over time.
No one should just be looking at the monthly mortgage payment, you need to look at what does this mortgage look like 11 years from now when my kids are about to graduate high school, let's say. Because you can have ways of using the mortgage as part of like a financial plan. A mortgage is not credit card debt. It's not this mysterious type of situation, in fact it's a financial instrument to help you gain and garner wealth.
There's no other country really that has a 30-year fixed mortgage, a very safe financial instrument. You as the customer really have to have people who will tell you things like, if you take your Starbucks habit everyday, you put that $6 a day towards your mortgage, you will be debt-free years faster, maybe five, six years faster.
People don't know that and your mortgage originator, your mortgage professional, people who care about your fiscal health, will take you to a mortgage strategy, not a mortgage price. I think that's probably the thing I say no matter where you start, you need to make sure you're getting advice.
Andrew: What are the inventory challenges that you referred to earlier?
Joe Puthur: Going back to the inventory challenges, I mean you've got some competitive markets in your space today in the communities you're in. You have some fantastic companies coming to Pittsburgh. You have folks like Google and other high-tech startups from the great schools that are in your area, I mean fantastic students and hires that our people are competing for.
That is exciting because that means your home values are going to go up. That means the home is a more solid investment than ever before. But that also means that when you walk into an affordable house, when you walk into a home that, you know, as a teacher and a firefighter you can afford, there are five, six, seven other families like you that are competing for that home unfortunately. There is just not enough starter home inventory anywhere.
This is not a problem just for where you are, this is a nation-wide issue. It comes from lots of different points of pain, whether it's just availability of property or whether it's the type of regulation in what you build. Because folks are in flood plains now that weren't in flood plains before or a whole litany of issues that as a builder you have to consider when you're constructing a home.
We have people in every community that are so necessary to the quality of life in those communities that they're simply aren't enough new homes for them. When you find a home that you like, but more importantly when you find a neighborhood you love, you want to make a move on that property.
Andrew: Tell me some of the government programs that are out there for first-time homeowners. Are they plentiful, are they hard to find, are they as effective and helpful as advertised? Take me through that process, if you could.
Joe Puthur: Absolutely. The great news for customers today is that there are many, many programs that align to the diversity of the American workforce right now. In terms of government programs if you're a first-time homebuyer, there are many paths for you to become a homeowner today. Even at paths where mom and dad can help you with your down payment, there's misinformation that you need 20%. You can have 3% and again, you can have help with that 3%.
You can be in situations where there's down payment assistance, not just from government but from all kinds of other incentivization programs to help you get started. Because while the media wants to sensationalize somewhat some of the crunch in credit, the mortgage innovators and lenders have worked hard to maintain the promise of accessible homeownership. I can say that as a third party. I'm a technical innovator, I'm not a lender.
Andrew: Mm-hmm (affirmative).
Joe Puthur: People are using ... I'm an advocate for the customer. I was advocating visiting with folks from both sides of the aisle just last week in DC to have these types of conversations about what does the customer need today. They need financial transparency. We're not teaching some of these concepts in primary education unfortunately, so they need to be even more readily available for everyone.
The government programs that are available today are there. If you want to be a homeowner right now and you are dedicated to being fiscally responsible, you're paying your rent on time, you're paying your bills on time, you're doing what you can to demonstrate that you have the ability to repay your mortgage, you have access to a mortgage.
For the listeners on the phone, on the call here that worry about government programs in general, there are many private mortgage programs as well and people don't realize just how healthy the sector is right now. For example, a customer today can get private mortgage insurance. Again, the media I think in some cases has presented or not presented what mortgage insurance is.
What it can do is, you can have a path again to affordable homeownership where making it part of your financial plan, the mortgage insurance product can actually deliver quite a few benefits, such as being able to have a slightly higher initial purchase price. You fall in love with a home, you might be able to afford a house that's 10 or 15, $20,000 higher in asking price.
Now what mortgage insurance generally gets misinterpreted unfortunately for, is an extra payment but unlike government programs, that payment falls off once you've paid an amount of the loan amount. In a lot of the government loans, the fees to "insure the loan" go on forever.
One of the analyses that I teach top originators and advisors to present to customers is, when that insurance payment that you've been paying for a number of years ends, just keep making that payment. Suddenly what you had as a 30-year mortgage, now you've paid off in 18 years, 17 years.
Because for a lot of people, it's just a habit of not just buying or finding the loan that's as much as you can afford, which got a lot of folks into trouble-
Andrew: Mm-hmm (affirmative).
Joe Puthur: ... but how much loan can you take on to meet your lifestyle? Do you want to take six weeks off and take the kids on an amazing summer sabbatical? You want to take that in to account when you're making your mortgage payments.
If somebody approaches you as a mortgage advisor and they conversation is, " This is the maximum you can afford," versus, "what are the other things that are important to you-"
Joe Puthur: ... "other than just your neighborhood," those are some of the indicators that you have a good person.
Andrew: Yeah, I think the way you're putting it and we've had people on the show talking about these types of situations before. Usually the interest rates on say like a student loan, not that you're going to be able to consolidate a student loan, but in some cases the interest rates are so low, it doesn't make sense to pay them off as quickly as you can because you're not going to really ... It's not going to hurt you because you might have a 2% or 3% interest rate on those student loans. But you're saying here with a mortgage here, with a home loan, that you're better off paying it off as quickly as you can, right?
Joe Puthur: Often times that's absolutely the case, because there's other investment vehicles to look at the asset of your home-
Joe Puthur: ... to leverage in all sorts of other ways.
Joe Puthur: Have you dreamt of opening a restaurant or owning your own small business or breaking away from the company you've worked for, for 5 or 10 years as a skilled worker or contractor, and being your own entrepreneur? Following that part of the American dream? Your house is one of the best assets-
Joe Puthur: ... for when you have the most equity in it, you can lean on all sorts of things, like an FBA Program here in America, to be able to kick off your business. People cannot look at home debt or home equity the same as any other vehicle, and that's why the 30-year mortgage, the predictable debt payment is so important.
You look just north to Canada, Canadian loans recast every five years. There's not this concept of 30-year safety. When you think of the American middle class, homeownership is one of the key parts that gives everyone a fair shake, and it gives everyone the ability to have something that stands the test of time.
People being irresponsible, and when I say people I am talking about the rating agencies and the giant investors. I'm not talking necessarily about the community banks and folks who have always been dedicated to the hard working families that come in-and-out of their doors. When you look at that level of dedication to continuing a 30-year fixed instrument, that's something that gives all of your listeners some path to the dreams they all have.
Andrew: Yeah. Joe, I want to ask you about the people out there that are listening, that are responsible but they live paycheck to paycheck. They pay all their bills on time, whether it's their car payment, their utility bills, but they don't have a lot of money saved up. Maybe they don't even have a savings account. They've got their checking and they don't have a lot of credit card debt built up either. They're financially responsible but they don't have a nest egg. They're paying say $600, $700 a month in rent, money that's going really down the toilet with nothing to show for it. Talk directly if you could, to those people. How does that person make homeownership a reality?
Joe Puthur: Sure. First of all, again I think that running the numbers that people often times put in front of themselves, like 20% to try to avoid cost and fees that really are misrepresented, can intimidate someone or dissuade them from having the conversation. There is no one, there is no one listening today that if you have the aspiration for homeownership, that you shouldn't reach out and talk to a professional. There is no time that's too early because a quality professional will want to be there when you're ready.
You will find people in the mortgage market that are content with just waiting for a call. It comes in, they'll talk to you, you're an easy loan, you got good credit, you can absolutely flow through the system and that's easy for them to do. But when you might be a buyer where you might need to get down payment or maybe you want to take advantage of the Fannie or Freddie Program, a home-possible loan, which are the types of programs that are available for just those types of customers that you talked about, who can show that they are responsible in many other ways and maybe just a Google credit line type of conversation. That originator will be there for you.
They might give you access to technology that lets you keep track of homes that, as you look for the next year, you find the neighborhood you fall in love with. Because over the course of a year, there are probably more than enough things that you can do, if you're that person, to be lender ready at the end of that journey. It doesn't take 10, 15 years to be financeable to prove that you have the ability to repay.
Andrew: Mm-hmm (affirmative).
Joe Puthur: Because that is what financial regulation has done to make the market safe, is that it's created a framework that every lender, large or small, has to collect enough verifiable information to you that they can show the federal government that they have done all they can to make sure you can repay the loan.
Now there are things that your customer and the listener should be doing in general, like telling their legislators on both sides of the aisle that we need better credit reform. There is a better way to measure credit than a FICO score alone and most of the communities that don't have access to credit would be the ones that would be best served by demonstrating these things. Such as, a lot of times when you pay rent there's not a method for people to put the fact that you're paying rent on time on your credit report.
Joe Puthur: That is a huge miss. If you pay your rent on time, that should absolutely be on your credit report. That is the closest thing to a mortgage that there is. It's insanity in a lot of ways. Legislators can change that.
I think that everyone listening that wants to be a homeowner, create a relationship with a mortgage advisor. Someone who will be there 6, 9, 12 months to help you execute when you're ready and in many cases, help you discover that you're ready today. You've got a path right now.
If you run in to one of those folks that doesn't deliver you the services that you'd expect and treats you like another caller, a number, an assembly line, let their parent company know because those are the bad actors that we want to get out of the profession.
Andrew: Alright, how about the people who are listening that are homeowners and they get calls or they get mail all the time that says, "Hey, consolidate your home loans. Get a lower interest rate. Sign up for this, sign up for that." What would you say to those people?
Joe Puthur: I would say to them that there's a difference between marketing and a relationship.
Joe Puthur: I get asked a lot, being a technologist, is there an end to the mortgage sales person or originator, the loan officer? Are we at the point in time where it's going to be super automated, almost like a car loan more or less, is it a faster piece of debt? By the way, I do not want anyone to mistake comparing a mortgage to a car loan. A car is a very different debt instrument. You're not acquiring equity and investment capabilities from a car. You can't use it to help you with a small business, other than maybe delivering things around. Even then, it's going to be a cost not an asset.
All that being said, they can look at those things as advertising. If you have a trusted mortgage advisor, someone in your initial transaction, they treated you correctly in helping you understand your financial plan, then when you see something like that you should reach out to them. "Hey, how is the market doing today," and they should be able to show you in 10 minutes or less.
They should be able to, again using Mortgage Coach technology your graphs and charts would move on your phone, you'd see things happen instantly, it would ...They help communicate that information. No matter what they use or who they are, they should be able to say to you, "This is what things look like today. Good, bad or indifferent."
Rolling that in-or-out of your mortgage, there is more than one way to do that. Home equity line of credit refinance is one, a very strategic one often.
Andrew: Mm-hmm (affirmative).
Joe Puthur: Again, a mortgage advisor is going to talk to you. What are you actually trying to do? In that conversation you might actually find out, for example, that they have enough kids in that family they're short a bedroom, and it's not actually time to refinance, it's time for a move-up house.
There's a high school that's just a little bit better, has some better math and science programs, that there's an athletic program that your kids really want to be in. Just because you live a mile and a half away, you're not able to take advantage of that. And you know, that's what you're working so hard for.
Joe Puthur: You're working so hard so that you can take advantage and that you can be part of those programs, so find the home you like. That advisor can likely show you a path and a plan to have the space you need. Because once again, if you're a responsible worker today and you are being cautious of how you are spending today, you do not have to have a giant nest egg to live in a nice neighborhood.
Joe Puthur: You just have to have a plan.
Andrew: Joe, how about the homeowner out there who, they get the ... Whether it's a Wells Fargo or whatever lender they're using, whatever mortgage company. They get the monthly bill or statement every month. They fill it out, they write the check, they send it off, and that's all they do. They write the check every month, but they don't really look into it at all. They just ... Here's how much they say I owe, I pay it.
Is that person being, I don't know. Are they being willfully ignorant? Are they ... Do you support that kind of, okay, that's how much you owe; pay it month-to-month. Or does that person need to be more proactive in your opinion?
Joe Puthur: I think they absolutely need to be more proactive, even if it's $10, because anything you pay above the minimum payment is essentially coming ... In a simple way of saying it, it's coming off the top. The more you can pay up front, the faster you are paying down the overall owed debt, the quicker you can have access to the rest of that asset being looked at as just that, as an asset.
When we talk about that small business and wanting or needing an extra work truck or wanting to hire another person, or all the different things that happen as an entrepreneur in America, the idea that your home can be both a safety net or an asset for all of those capabilities come very much from having it be debt-free. At least to 50% or where you have a good amount where it really doesn't matter if the neighborhood price goes up 6% or 5%, or even goes down a couple of years and goes back up. You have ... It is an asset, it's a giant safety deposit box that's there for you.
What a mortgage advisor can do, and again this is one of the strategies of Mortgage Coach, is why millions of people use the Mortgage Coach App on their phone to work with a professional to walk them through these visuals, is to see things like if you put $40 a month toward your mortgage, that's three years of debt eventually coming right off.
Andrew: Yeah, good point. Good point. How do people get this again, this mortgagecoach.com?
Joe Puthur: Yeah, so mortgagecoach.com is really how we explain to lenders. When you're ... What we've done is, I've set up a website just for you guys. You go to ineedmytca.com and that's going to let you tell your lender about our technology. Because in the end, you need a financial professional that you trust, that you like, and if you tell them that you need a total cost analysis - that's what a TCA stands for - the Mortgage Coach Total Cost Analysis-
Andrew: Mm-hmm (affirmative).
Joe Puthur: ... so it is a review of all your options in a visual way. If you went and go get a used vehicle or you wouldn't do a home without an appraisal, you wouldn't get a loan without a total cost analysis, our premise. You want to know what your options are and how they'll perform over time.
It's easier than ever for financial professionals to learn this technology. We teach them how to use it, teach them how to show you graphs and charts if they haven't done it for you before. This is a method for you to tell your professional that you want to use the service.
For us again, people ask me, "Can I give you my name and you tell me a mortgage person?" You know your neighborhood, you know where you bank today.
Joe Puthur: You know friends and family. You've got hockey team fans, incredible fans, that know somebody who's in the mortgage business and ask them.
Joe Puthur: Ask your neighborhood professional, because 10 years from now, 20 years from now, 30 years from now when people are taking out debt of 200, 300, 400, 500, $600,000, nobody wants to just ask the internet. You want to ask your neighbor.
Joe Puthur: You want to ask somebody who has a vested interest there too. So as much as the computer is going to help, you're going to see your loan officer give you technology where just two years ago, you might have had to FAX in paperwork and now you can put your Bank of America, Wells Fargo login and they have all that information in a secure way. That's amazing.
That's the kind of things and efficiencies that take what used to be a painful process, and allow you to focus not on price, but on advice and allow you to look at affordable homeownership ...