Interview transcript from the closed captioned interview:
Steve O: Hey, good morning. Welcome to another SC Experts, where we bring you the top experts in the fields of legal, health, financial, and home improvement..
Steve O: Well, you know what? I was just right before the show looking at my phone. We’ve got about four or five text messages here because they know we are getting ready to do our home lending show, and everybody had the same question: :50 When are rates going to go down?
Jackie Barikhan: Good to see you, Steve!
Boy, I wish I had my crystal ball…. we do pay for some of the best data. We have some of the most knowledgeable people that send us text reports/updates on the market and emails all day long, and they’re saying it’s probably going to be about a year or so. So, we’ll see what happens. So, we’re supposed to be getting a couple more rate hikes, and then eventually, it should be coming down after that.
Steve O: 1:29 What have rates done to home sales?
Jackie Barikhan: Home sales are very subjective to the market. Here in Orange County and up in LA and down in San Diego, which are our main markets, we’re still staying busy. There’s just not a lot of inventory. That’s part of the problem too. I mean, obviously, the price of interest rates being so much higher has affected some people’s ability to purchase. So, it’s a little tougher for some, but there’s still opportunities. There’s always opportunities if you stay positive, right… work hard. That’s what we try to do.
Steve O: Not your fault the rates are high…not your fault, Jackie.
Jackie Barikhan: Definitely not. I will say it was nice when we got to sell our 2 percent rates, you know, a year and a half ago…. the lowest rate that I ever was able to get a client, was like a 1.75% or something like that. It was for a veteran, and I was, “Wow, Isn’t this awesome. I hope he never refinances.”
STEVE O: 2:30 Jackie, tell everybody a little about your company and the types of home loans you can do.
Jackie Barikhan: Summit Lending and www.MyLenderJackie.com, is my website. We do many types of home loans, from conventional loans that are typical, where you’re showing two years of tax returns / W-2s and pay stubs, if you have a consistent job.
We also are specialists in a type of loan called a non-qualified mortgage, which is mortgage loans that are a little outside the box.
Common sense thinking comes into play, and those types of loans are what we’ve discussed in the past, where we talked about bank statement loans for people that own their own businesses.
So, rather than looking at tax returns, we can look at the bank statements to show their income.
We also have our cash flow program, which is a program for property investors, where the only income qualifier, is for the rent of that property specifically, and that’s it.
So, that’s a pretty cool program. And then we have some other programs called the no-doc loan, and that one is the one I think you might want to know a little more about today.
Steve O: 3:49 Here in Florida, we are hearing from mortgage companies offering programs saying no credit, bad credit, brand new on the job. I mean, every possible thing you can think of, will get you approved. Do you have the same thing in California?
Jackie Barikhan: We do have a no-doc product, and the no-doc product is a little more creative than most, because there’s no proof of income requirements, but FICO score is important, down payment is important, reserves are important. If you put all those together, it’s a very simple program, and it definitely helps certain types of clientele.
Steve O: Well, I was gonna say, if we allow this to happen again because this happened once before, people getting approved that should not have probably been approved, we’re gonna be a mess again.
Jackie Barikhan: I don’t think we’re going to have that again because these types of loans, even though income isn’t part of the equation, FICO is very important, down payment is very important. You got to have skin in the game, and you got to have reserves to be able to do a no-doc loan.
So even though it sounds like the stated income loans from 2008 and before, it’s a different animal because it’s credit-driven, it’s down payment-driven.
Back in 2008, we had a lot of the 100% financing, no money down, 580 credit scores. You could buy a house with no money down, and you didn’t have to have very good credit. Not a great idea.
Steve O: 5:58 What is the main difference between a traditional mortgage loan and a no-doc mortgage loan?
Jackie Barikhan: Okay, so traditional mortgage loans are for people who have had their job typically for at least 2 years. They get W-2s and pay stubs and can show two years of tax returns. Conventional loans, FHA loans, VA loans, they all fit into that category.
The no-doc loan is part of the non-qualified mortgage category, which is a loan that basically is just looking at FICO, looking at down payment, and it’s looking at reserves.
So, it’s a much simpler process because there is no job history, there is no income that’s being used to qualify for debt-to-income ratio.
So, it’s a simpler product, and there are certain types of clientele that would want to use this type of loan.
Steve O: 6:56 Are there any specific industries or professions that are more likely to choose to do a no-doc mortgage loan?
Jackie Barikhan: Yes, absolutely. If you’re self-employed, you own a business, you’re in an all-cash industry, restaurant owners, we’ve done loans for people in the cannabis industry, real estate investors, we had a client that had 17 LLCs and over 200 different properties. Clients with change of life situations, I’ve got ladies who were recently divorced, and they got a nice settlement, but they’ve never worked before. They don’t have any job history, but they have money for a down payment, and they’ve got money to be able to make payments. This loan would be perfect for them. So, there are certain types of clientele that are perfect for the no-doc situation.
Steve O: 7:55 What kind of factors do lenders consider when they’re evaluating these eligibilities? How do they decide what’s the best loan for them?
Jackie Barikhan: That’s a really good question. When anybody calls us that wants to get a home loan, we talk with them, we’re interviewing them, we’re looking at their situation, and depending on what we hear when we have our conversation, we can determine if we think they’re going to be a good candidate for a conventional loan.
We would want to look at their tax returns and their W-2s and their pay stubs, and that might be the best thing for them. That type of loan is going to have the lowest interest rate, and that’s going to be the best product for them, if that’s what they can show.
But many times we get into the conversation, and we find out that they’re self-employed, and a lot of the money that they earn is in cash, and it doesn’t get deposited in the bank…. all sorts of stories, everybody has their own personal story, and there’s no problem with that.
The point is, we’re going to determine as we talk to you, which program is going to be the best one for you.
We just happen to be specialists at doing the non-QM loans, which is, bank statement loans, no-doc loans, cash flow loans.
Every loan looks at basically the four C’s of credit :
- Character, or your credit. How well have you paid back other people? And that’s determined by the type of trade lines that you have on your credit, what your credit score looks like.
I mean, if you have a 750 credit score, do you have a 650 or a 550? Those things tell us a lot when we look at that credit score.
- Capacity or Income, We look at normally on a full-doc loan or on a bank statement loan. We can look at income a few different ways, though. We can look at it with tax returns, we can look at it with bank statements. For a cash flow loan, We can look at the income of the property itself, with the amount of income that it’s coming in as a rental for cash flow.
3. Capital, which is your skin in the game, right, and that’s very important. So, back in 2008, you could buy a house with no money down.
Nowadays, everybody needs a down payment, so with a conventional loan, you can do as little as 3% down, 5% down.
On a bank statement loan, we’re looking at 10% down.
On a no-doc loan, we need 20% down.
So, skin in the game and your capital is very important. Finally we are also looking at reserves.
Reserves are something that shows how much money/savings you have left over, after you made your down payment and paid your closing costs.
- Collateral, which is the property itself. What is the condition of the property, how many bedrooms and bathrooms, where is it located, is it on the beach or in the town or, is it on 10 acres, or is it a single-family residence or a condo or a duplex or 4 plex?
So, all of these 4 C’s are the basics for a no-doc loan. All would apply, except you would just take out capacity or the income piece.
So, we’re going to look at everything else, but we don’t look at the income.
Income is not part of the equation for a no doc loan.
Steve O: 11:14 How long does it take to get a no doc loan approved?
Jackie Barikhan : We’ve closed these no-doc loans in about 20 days, top to bottom, start to finish.
Steve O: 11:30 How do interest rates and terms for these no-doc mortgages compared, to say the traditional mortgage loans?
Jackie Barikhan: You can imagine where the investors who purchase these types of loans… hedge funds, insurance companies, Wall Street guys, they look at a risk-reward basis.
So obviously, if we’re not proving income, it’s a little riskier proposition. So, for that amount of extra risk, they’re going to look for a little bit more return on the interest rate…. but it’s not like hard money.
Currently (JULY 2023) we’re in about a 7% interest rate range for a full doc loan, where you show your W2’s/ tax returns.
If you did a bank statement loan, those interest rates would be pretty similar, sevens and eights, probably. So, about a point or so above the market.
The no-doc product is probably another point above that. So, probably eights and nines right now. There are also options to buy rate down into the 6’s.
Steve O: No Doc loans better than hard money? Hard money is like 10, 11, 12?
Jackie Barikhan: Right, plus you have all the costs associated with hard money – typically 3 or 4 points etc…
Steve O: 12:43 Hey, no more three percent interest rates, huh?
Jackie Barikhan: Not right now, not right now. Hopefully, it’ll come back.
Steve O: 12:55 Let’s talk about specific situations where a no-doc loan maybe more advantageous for a borrower?
Jackie Barikhan: We’ve had so many different types of clients that we’ve worked with over the last 30 years.
So, our all-cash customers, certain types of industries where you get paid a lot of cash or you just can’t document it or whatever.
That’s the sweet spot for this no doc program.
Restaurant owners, the cannabis industry, recent divorces. We had a guy that was selling those beautiful high-end tennis shoes, and he was selling them online. He didn’t really have the bank statements to show that, but he was making plenty of money, and he had a nice down payment, he had nice reserves.
So, that was a great example of somebody taking advantage of the no doc loan process.
We look at the whole picture.
If we can qualify you with a lower interest rate, with a different program, obviously, we’re going to do that for you.
If for some reason it’s just not quite fitting, then the no-doc loan makes a nice option.
There are no prepayment penalties on these loans, there are no gotchas that are going to get you.
Let’s just say in a year from now, interest rates are a whole lot better and you have tax returns to prove your income, you can always refinance that loan into a conventional loan, FHA loan or a bank statement loan.
We recently had a client that was just starting a business. So his bank statements for his business weren’t really showing enough income yet, but he was growing, and you could see the business, doing better and better. He didn’t quite have the 12 months of bank statements to qualify, to do a bank statement loan.
This no doc loan was perfect for him, he got the cash out money he needed to grow his business.
A year from now, when he has more bank statements for his business, he should be able to refinance it into a bank statement loan or maybe even an A-paper loan.
So, we’ll see where the market heads, we’ll see what interest rates do, we’ll see how that affects his debt ratio in the future.
These no doc loans, they serve a purpose… and most people didn’t know this type of loan was available.
Steve O: 15:37 What about specific credit scores for No Doc? What if you have a lot of cash, but you don’t have a high credit score?
Jackie Barikhan: There’s things you can do to work with your credit to help get your credit score up, where it needs to go.
But I’ll give you some examples with the FICO as low as a 660, we can do these loans. So, 660 gets you in the door for doing the no-doc program. The higher your credit score the higher the loan to value you will be given for example, let’s just say you own a property worth a million-dollars and you need some cash to grow your business… You could do up to a $750,000 loan or 75 percent of the value of that property with a 720 credit score. That same score 720, you could purchase a home with as little as 20% down.
So, part of our coaching when we speak with you, and we have a consultation, is looking at your credit situation. What you can do to help raise your credit score. Sometimes we can start the loan process at a lower credit score, and then by the time we’re ready to close, you can have a higher score, which will help you to get a better rate. So, we’ll discuss all that when you call us, and we’ll go over all these details.
Steve O: Jackie, 17:03 What about companies that say they can raise your credit score?
Jackie B: Credit repair companies are fine. We have a couple that we refer out to people, if you need help with things like that. Basically, they write letters on your behalf, and they submit them to the credit bureaus. There’s other things that you can do that aren’t as expensive than going with a credit repair company. But that’s on an individual basis. I would say, it just depends.
Steve O: I want to read this text we just got from Miller. I want to know, my credit score is lousy, 502, but 17:52 I have a lot of money in my bank account. Am I going to have trouble getting a home loan? I am just starting out.
Jackie B: With a 500 credit score, it would make sense that they work on getting that credit up to help get a better rate. I hear there are new programs coming that don’t require a credit score, but need 40% down.
Steve O: 18:40 How do lenders determine the loan amount, say, for these no-doc mortgage loans?
Jackie B: Loan amounts go up to three million for No Doc and 5 Million for Bank statement loans.
Steve O: For no-doc, I think three million is probably good enough. You know, for your first home, you can always maybe move that.
19:20 You do loans in just California or just the Los Angeles area?
Jackie B: All over California, for the bank statement loans and no doc and for our cash flow loans we can do almost every state now.
Steve O: 19:40 Any restrictions in the type of properties that can be financed through these no-doc loans?
Jackie B: No-doc loans we can do anything from one to four units. So, single-family residences, condominiums, one unit, two units, duplexes, fourplexes, as long as it’s owner-occupied or can be a second home as well.
Steve O: Oh, Jackie, these shows go so fast. First of all, let’s give everybody your phone number.
Steve O: 949-600-0944 is my direct cell. You’ll get me personally. Or you can go to www.talkwithjackie.com. You can set up an appointment that works for you, and we’ll give you a call back at the best time for you. I recommend you also go to our website and check us out online. See our reviews…. We’ve got over 100 five-star reviews. So, that says a little bit. We try hard.
Steve O : Jackie, thank you so much. You’re just…you’re a world of information, and you communicate so well. Thanks again!
Jackie B : Appreciate it! Thanks, Steve. 😊