Episode #16 of Intentional Wealth: Loans and Mortgage Planning with Zaf Mohsin

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Welcome to Intentional Wealth, a monthly podcast where, alongside notable financial professional guests, Private Wealth Advisor and Founder of Braun-Bostich & Associates, Amy Braun-Bostich, delivers useful insights and strategies that help YOU live your best financial life! Remember, when your goals are meaningful and your wealth has purpose, you can truly live with intention.

Now here's the host of Intentional Wealth, Amy Braun-Bostich.

Amy Braun-Bostich: Welcome to another episode of Intentional Wealth. Today we are welcoming Zaf Mohsin. Zaf is CEO of Mohsin Mortgage Corporation, which is a full-service wholesale mortgage company, that specializes in residential commercial purchases and refinances. They are a wholesale mortgage broker designed to serve your financial needs. They specialize in conventional FHA and VA loans.

Mohsin Mortgage Corporation provides direct one on one customer service throughout the entire loan process and foresees that your loan transaction is handled by your personal broker only. They alleviate miscommunication and streamline the loan process for you. Zaf is joining me to discuss the mortgage rates today and what you need to avoid the different types of loans and more. With that, please welcome Zaf Mohsin.

Welcome Zaf. Thank you for joining us today

Zaf Mohsin: Thanks for having me, Amy.

As you had mentioned, we're a wholesale broker. What that means is we have several different avenues to put a loan through. Typically, as a consumer, a borrower, or if you go into a bank or a credit union or a local organization, they'll have one type of loan. So, a lot of times people are told we can't get it done because of your debt to income, because of your score, or some other reasons. So, what I do is as far as a wholesale lender, we deal with all the different large banks, say bank of America, Wells Fargo, Plaza, there's several different wholesale lenders. So, we have 40 different wholesale lenders, and we have several different products. So, because we have these choices, it's rare where we say no to a borrower.

And if there's a situation maybe where the scores are challenged, we are directly dealing with the credit bureaus. So, I can also help them get to a point where they can get qualified. So, we try basically because of all the options that we have, we basically say yes to more people than a traditional bank would. A traditional bank, you know, if you're not a 740 score and you're not putting 20% down on a purchase or your debt to income isn't like at 30%, they'll say no to 7 out of 10 people. While we flip that around, we'll say yes to 7 out of 10 and we'll try to fix the other people that may not qualify.

Amy Braun-Bostich: Yeah, that's great to know. That's really good. What loan is most common or popular that you offer?

Zaf Mohsin: It depends. Like, if you're a veteran, there can be a situation where you're buying a house or refinancing with 0% down, and that's a VA loan, FHA loan, you can put as less as 3.5% down on a purchase. Conventional as low as 5% down. And what we do is, we tailor the loan for the person depending upon how much money they want to put, or what their needs and goals are. So, there isn't exactly one that fits all. They're all popular loans, but it just, some things are better for some people.

Amy Braun-Bostich: What about for investment properties? What is usually the requirement there? I have clients that sometimes want to buy rental real estate. Are you required to put 20 or 30% down or can you do a 5% down in that situation?

Zaf Mohsin: On an investment property, you're probably going to have to put about 20 to 25% down. On a second home, however, like, I'm licensed not only in Pennsylvania and Florida, and a lot of people from Pennsylvania move to Florida on a second home, you could put as little as 15% down. So, you know, that's why it's always nice to have somebody you can talk to who's knowledgeable and give you all the options, you know.

Amy Braun-Bostich: Okay, but then if you do that, you have PMI, right? If you put less than 20% down, yes. How do they calculate PMI? Is that based on the value of the property?

Zaf Mohsin: It's based on the value of the property and the credit score. And there's a risk factor that's applied and we have the calculation, we run it through, and then we can tell the borrowers what that monthly MI is going to be on the, on that type of a loan.

And Amy, you know, if anybody wants to, they can directly reach out to me. What we do is personalize it. Like you were saying, one person, whoever starts the loan process, will start from the beginning through all the way through the end. So, it's not like a lot of, I have a client right now, he had, there's a reason why he had to, we couldn't put it together because he had to wait 6 to 12 months to refinance to get more cash out.

And he went to a local bank, and he's been moved around to 10 different people and getting 10 different answers. So that's why we pride ourselves on having the one person deal from beginning to end.

And if any of your clients want to call, they can call me directly on my cell phone, which is what we do weekends, evenings, and my number is 412-889-4411. That's what we're about.

Amy Braun-Bostich: Okay, that’ll be linked in the notes too. And then if anybody asks us, we'll go ahead and refer them to you.

Zaf Mohsin: That would be great.

Amy Braun-Bostich: To get approved, what requirements do you need then?

Zaf Mohsin: On a purchase? Typically, we'll need depends on if they're self-employed or a regular W2 employee. If they're a W2 employee, we would need their last two years, W2s, 2 most recent pay stubs, last two months bank statements showing where the funds for closing are coming from. And that would get the process started in essence. And a lot of people also know their scores on credit karma. So, if they happen to know that's helpful as well.

Amy Braun-Bostich: There's also some calculation on how much mortgage somebody can afford. How do you do that? What is the calculation there?

Zaf Mohsin: So, the different types of loans have different types of calculations. Such as the conventional loans are more conservative, so, they'll allow you only to have 45% of your total income going towards the mortgage and all debts. Where the FHA is a little bit more flexible. They'll let your total debts be up as high as 55% and the mortgage debt be around 46%. And we take care of all of that. And that's why I mentioned when we get the information, we're able to tell the borrowers which is going to allow them the most flexibility based on their credit scores, based on their income, and what's going to get them the most house for the money.

Amy Braun-Bostich: Well, only certain properties qualify for FHA though, right?

Zaf Mohsin: Correct. Most properties will. Regular townhomes, single families, multifamily, they will all qualify. The only place where there becomes a specific potential issue is when you're buying a condo. And if the condo is an FHA approved project, it's fine. But typically, you'll see with condos they're not FHA approved. So that's kind of where you run into a problem.

Amy Braun-Bostich: Well, what about like million-dollar properties? You can't do FHA on that, right?

Zaf Mohsin: You can, it just depends upon what the county limits are. So, like we're licensed in Massachusetts where the property is a minimal price of a property is around 500,000, for single family in the Boston area. So, their loan limits are a lot higher per county. And if it's a multi-unit then those limits get higher as well. But it just depends. In most, probably, like if we talk about maybe Westmoreland County or so, the limits might not be that high, you know, for an FHA, but we look into all of that, you know,

Amy Braun-Bostich: So, mortgage rates are finally coming down. When is it a good time to refinance?

Zaf Mohsin: Well, it depends. A lot of times it's not necessarily about… Obviously, the lower the rate, the better. However, what we do is we'll put a proposal together for people. To give you an example, credit cards are at like 20%, or 18%, and if people have large amounts of credit card debt, say 30 to $50,000, and their mortgage rates are, let's say in the fours, if they consolidate everything and we show them the savings, typically people would still be saving 5 to $600 a month, even if the rate, the new rate is like at a 5, 5, because they paid off credit cards at the 18% rate. And that additional 5, $600 a month means a lot to a lot of people, which they can put together, put away for college, or invest with a financial advisor such as you, and let the money grow.

So over 30 years, if you're saving 5, six hundred dollars a month, it can be a huge amount of money. So that's part of the things we do for free as well. We'll do a free proposal. Put the numbers out there, email it out to the borrower, they look at it, if it makes sense for them, then they'll move forward, or they'll just be like, okay, I just want to wait a little bit, you know, but it all depends. Everybody's got their, makes their own decision based on the numbers. But the numbers don't lie. You know, Amy, once you put it out in front of them and they're saving 6, $700 a month, that's a huge incentive. So especially with rates coming down even more now, it's going to be a, it's going to be a big boom.

Amy Braun-Bostich: There used to be like a sort of like a thumbnail rule, that if the rate isn't like 1% lower, it's not worth refinancing. I think that was what it was.

Zaf Mohsin: Yeah, it was. That's out there. But it also depends on how much debt you have. You know, if truly, if you have no debt, I think that rule holds true. You know what I mean? Because with, you know, if I go from a six or from a five to a four, that might make sense if I had no other debt, you know? But someone who has another 50, $60,000 in 18% credit card debt, it more likely will make sense because they're paying off that debt at 18% and bringing it in at 5%.

Amy Braun-Bostich: Yeah, we don't typically see people like that in our practice, but I can imagine that you do see a lot of that, right?

Zaf Mohsin: Yeah, there's a lot of, I mean, the average, you know, credit cards for Americans on average is $30,000. But of course, it all depends. It's an average.

Amy Braun-Bostich: $30,000 in credit card debt?

Zaf Mohsin: On average. And people have student loans, they have other debts as well, you know.

Amy Braun-Bostich: Yeah, no, I understand about student loans. I just didn't think credit card debt was quite that high. So, I think what you're saying is even though the rates have dropped, what is it, like three quarters of a percent so far, that maybe for some people it'd still be a good time to refinance, instead of waiting to get to that 1% or 1.5% drop, based on what their credit card debt is?

Zaf Mohsin: Yeah, it depends on the specific situation. And as you know, Amy, when the Fed dropped rates recently, the bond market went up. So, the rates, they were already priced in. So, mortgage rates are really hard to see where they're going to be. They are on a lower track, that's for sure.

Amy Braun-Bostich: Yeah. I always thought it was curious that mortgage rates are more aligned with the 10-year treasury, than they are with the 30-year treasury, which seems really odd when you think about it, but, so I guess what you're saying is that just because the Fed lowers rates, doesn't mean that the mortgage rate is going to go down, as much as the lowering of the rate by the Federal Reserve? Is that, am I hearing that correctly?

Zaf Mohsin: Correct. And not always at the same time. It's priced off the 10-year, like you said.

Amy Braun-Bostich: Okay. What other things affect housing market trends, do you think?

Zaf Mohsin: Well, right now there's a shortage of housing, even with the high rates. The new home builders are doing really well because they're buying down rates and because there's a high demand. And then household formation is increasing as well. So that's putting pressure on it. And people who are refinanced, or bought homes at 3%, don't want to sell their homes now and have to buy another one at 6% or 5.75. So those are all the trends. But right now, there's high demand for homes for sure. And that's going to be a long-term trend.

Amy Braun-Bostich: In the Pittsburgh area, you're seeing that as well?

Zaf Mohsin: Everywhere. Pretty much everywhere, yep.

Amy Braun-Bostich: Okay. What type of mortgages can first time home buyers use and what other forms of grants or down payment assistance can they get?

Zaf Mohsin: It depends on criteria because there's a lot of income based qualifications. The type of loan, types of qualifications and we look into all of that for our borrowers. There's also a new product with the FHA where they allow, they'll do, the lender will do the first mortgage and the second mortgage, so that the borrowers don't have to bring any money, any down payment money for closing. So that makes things more affordable. But we look into all those items for the borrower once we have their initial information.

Amy Braun-Bostich: Do you have any recommendations on how much people should save for a down payment?

Zaf Mohsin: The more you can save the better because it gives you flexibility. You know, I don't say that you should put all the money down, but the more money you have saved for the transaction, the better. But personally, I think it might be, the way I look at it, I would try to put minimal down, three and a half or five percent down, or zero, if you're a veteran, and keep the money in hand for flexibility and liquidity.

Amy Braun-Bostich: How much should people put aside for closing costs and other major expenses?

Zaf Mohsin: Well, it depends on the loan amount, you know, because the taxes and insurance, if you're, let's say in Wexford versus other areas, where Wexford, the taxes will be very high, other areas they'll be very low. Those are all part of your closing costs. So usually have 12 months of taxes and insurance, title insurance included with those items.

Like I said, the more you have, the better. I would say 20 to $30,000 would be a good number, but of course it depends. If you're buying a million dollar property, you're going to want to have a lot more money than that, you know.

Amy Braun-Bostich: Yeah, you're talking about just for closing costs, 20 to 30,000 somewhere in that neighborhood.

Zaf Mohsin: Somewhere in that neighborhood. It depends on the price of the home.

Amy Braun-Bostich: And that would cover like real estate expenses too for the agent, commissions for the agents, and things like that? All in.

Zaf Mohsin: Those items are separate. But I'm just giving you an approximate, like I mean it depends on the price of the home. If it's, if it's like a price that's more like 300,000, you're probably looking at 20,000 you want to have in hand. But the real estate items are, were, paid by the seller's agent before. Now everything is being negotiated as you know, with the new laws and the new regulations. That stays outside of, you know, the financing transaction that we had.

Amy Braun-Bostich: Are you familiar with those new laws about commissions and things?

Zaf Mohsin: Well, it used to be where the seller's agent, the seller would pay for the buyer and the seller. That's just the way it was done. Now, that is not the case any longer. It has to be negotiated. I don't know the exact details and all the nuances, but I do know that for the buyer's agent to be paid, they have to negotiate with the sellers to add value and ask to figure out how much they're going to get paid on that transaction.

Amy Braun-Bostich: They do that ahead of time? That seems awkward.

Zaf Mohsin: That's my understanding. Yeah.

Amy Braun-Bostich: In California, it's, there's a limit in the state of California to how much you can even pay.

Zaf Mohsin: I think usually it used to be like three and a half percent on each side, but I'm not sure anymore how that's going to work. I think that you can still do three, or three and a half, on each side, but with negotiating going on, a lot of realtors are doing it for 1% or 1 and a half or 2%. What the market determines, you know.

Amy Braun-Bostich: Yeah, right. People, the days of people paying 7%, I think, are kind of over, especially with all the online sources, right, of looking for homes.

Zaf Mohsin: Absolutely. Yeah. Online I see, I see where we'll list your property for 1%, like just going right in, you know. So, it's become very competitive. Definitely. And that's good for the consumer to a degree.

Amy Braun-Bostich: Yeah. Are you guys feeling like interest rates are going to go down some more and that mortgage rates will follow? What, what is your thought on that?

Zaf Mohsin: I think they're going to come down. I mean, it doesn't mean that it's going to come down all at once, or very quickly. I think the Fed will keep cutting at 25 basis points for the next couple and I think the mortgage rates will follow. There are anomalies. The jobs report that just came out is the reason why the rates went up, because the numbers looked good on Thursday. There's another number coming out, and if that number looks good for inflation, then the bond market, the rates will drop even though the Fed hasn't done anything. So, it's pretty. Depends on different numbers, the economic numbers, but we are on a lower trend for sure, which is a good thing.

Amy Braun-Bostich: Well, is there any other information maybe that I haven't asked you that you think our listeners should know about mortgages?

Zaf Mohsin: I think it's just good to call and talk to somebody who has, who is willing to give their information and their knowledge. Just have documentation ready as much as possible and get a pre-approval if you're looking for a home before you go into the transaction. Because the realtors need those preapprovals nowadays and we're happy to do all of it.

Amy Braun-Bostich: How long are those good for those preapprovals?

Zaf Mohsin: They're good for about 90 days. So as long as we have bank statements, W2s, pay stubs, if they're self-employed, tax returns, we can pretty much have everybody qualify. And we have the lowest rates because we have several different outlets that we deal with.

Amy Braun-Bostich: Have you seen any problems with retired people that don't have incomes getting mortgages?

Zaf Mohsin: No, it just depends. Well, it will depend upon the income, you know. So, if they're getting a large annuity payment every month plus Social Security, it is based on the income. So that wouldn't be a problem as long as the numbers will, you know.

Amy Braun-Bostich: So, in that case, the lenders don't look at how much money they have, you know, how much investment assets they have at all… it’s all about income?

Zaf Mohsin: They do look at the assets which add strength to the file, but they also look at the monthly income that's coming in. So, it's a combination. So, if they're drawing from annuity or they take regular payments from, let's say funds they have saved, over the last 12 months consistently, that can also be used as income, inclusive of Social Security, pensions, or other income.

Amy Braun-Bostich: Yeah, I've just heard some anecdotal evidence that for some people that, you know, maybe aren't taking a lot of money out of their assets but have sizable assets, they're still getting some pushback from larger banks like Bank of America, you know, that some banks just don't, are so income focused that they're not looking at, you know, all the assets that are backing up that client.

Zaf Mohsin: Yeah, I mean, like I was saying, if they're getting, you know, I'm just throwing out some numbers. If they're getting seven, ten grand a month and it's consistent and it's taken out every month at that time, that can be used as income.

Amy Braun-Bostich: Right, right. But some, you know, some of my clients don't do that. They just take, they take money as they need it and they might have two, $3 million, you know, sitting there that they can utilize, but maybe they don't take it frequently. They just take a lump sum here or there as they need it. So, that's interesting. I would think that the banks would be more concerned about ability to pay based on assets rather than income.

Zaf Mohsin: Yeah, they just need what we typically look for is consistent withdrawals from those funds and then they will use those funds. Amy Braun-Bostich: Right. Well, thank you. This has been really helpful. We appreciate you coming in today. And hopefully this is good information for those looking for future home purchase. And we really do appreciate your time and value for this discussion. Thank you.

Amy Braun-Bostich: Right. Well, thank you. This has been really helpful. We appreciate you coming in today. And hopefully this is good information for those looking for future home purchase. And we really do appreciate your time and value for this discussion. Thank you.

Zaf Mohsin: Thanks for having me, Amy. Appreciate it.