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19 Jan Ep. 36 John Charlton The Mortgage Guy


In this episode Realtor Adam Kruse and Realtor Shannon St. Pierre talk to John Charlton The Mortgage Guy. Find out why John almost never sees a contract in the St. Louis area without concessions from the seller.

Email questions to PODCAST@HermannLondon.com

John, Shannon, and Adam

John, Shannon, and Adam









3:00 Agent tips and tricks from a recent deal
4:00 Shannon is working on a lease/purchase deal
8:30 What’s the first thing to do when deciding to buy a house
9:00 How are the rates
13:30 The markets were already prepared for the tax reform bill
11:40 6.5 used to be considered a good rate
14:25 What is a 1031 like kind exchange
17:00 Closing costs credits and changes to the Realtor contract
18:00 John Charlton almost never sees a contract without concessions from the seller
19:00 Denver is a seller’s market and John almost never sees concessions
20:25 Special wording on the VA Rider
21:25 Banks don’t charge bank fees on VA Loans. It’s meant to be 100% free financing
22:33 A VA Loan is a sweet deal and all military personnel need to be looking into it
23:00 3% closing cost is a good benchmark unless the home is over $250,000
26:21 What are the credit thresholds
30:00 People with damaged credit need to know they can fix it. It’s an algorithm, not voodoo
30:30 Can you get a loan with no credit
31:15 The ideal buyer has a credit score higher than 750
31:50 What is the minimum credit score
32:03 Buyers want to know what they can afford
32:42 Don’t avoid talking to a lender if you have bad credit. They could be helping you fix it
33:13 A lender wants to know what the buyer is paying now and if current home fulfills needs
35:26 A Realtor doesn’t want or need to know how much the client makes
37:07 A safe harbor in U.S is 43% of income can go to a mortgage
39:49 What is a bridge loan
43:38 When is a reverse mortgage a good idea
45:20 Is it still a good time to refinance
46:32 How to get rid of PMI (private mortgage insurance)
47:00 Recasting a loan on a shorter mortgage
48:38 What is the rate difference between a jumbo loan and a 30 year fixed
50:57 Why do refinancing terms vary by lender
54:00 Who lives under John’s roof
54:30 When is John at his best
55:00 Does John have a favorite blog or podcast
55:30 Does John have a guilty pleasure
56:00 Who is John’s mentor and how has he thanked them


Adam-Welcome to the St. Louis Realtor Podcast live from the offices of Adam Kruse. This is episode 36. The jig is up. We don’t do it from the rooftop. I’m Adam Kruse and I want to introduce my co-host, Shannon, Realtor extraordinaire. What’s going on, Shannon?


Adam-We also have John Charlton, our guest of the night. We’ll get to him in a second. I want to give a couple quick updates. We had our business planning retreat last week. We had some really good marketing ideas that the agents shared with each other. Getting the group together and sharing ideas and problems is a great thing. It’s why we are a family. I haven’t really talked about investments in a while. I’ve been buying rental properties. I bought 4 last week with my partner Brian for an average of $20,000 each. The rent is $650 or so. The crazy part is our payments are $150 a month. We have a CPA coming to our office next week. He is going to give us some tax tips. Christa, one of our agents, got multiple offers on her latest rehab. She shared her tips at the retreat and what the winning agent did to convince Christa to accept the offer.

Shannon-What were her tips?

A-Number 1, the agent was calling Christa and chatting her up and building a relationship. Number 2, when they sent the offer they had the lender text message Christa and introduce himself to strengthen the purchase power of the buyer. Lastly, the buyer’s agent scheduled their inspection before the offer was even accepted.

S-That’s pretty bold to schedule the inspection.

A-They can always cancel it but I think they were showing Christa that they were on the ball. If someone offered a lot more I’m sure they would still go with the highest offer.

John-I’m wondering about the time frame. They were letting her know that they could close quickly.

A-They did like the time frame. Shannon has been working on a lease/purchase deal in the Cherokee area.

S-It’s on California. The seller has been wanting to sell the house but he is open to the option of lease/purchase which means you would lease the property for a specific amount of time with the intention of buying the home after that lease is up.

A-Those deals are hard to market. You can check a box for lease/purchase but you can’t just list it.

S-I don’t think you can search that.

A-A Realtor can under Special Terms but someone on Zillow can’t.

S-If you are interested in the Cherokee area it is a huge house. 5 bedrooms. 3 baths. 3 floors.

J-What’s the asking price?


J-Is that normal?

S-This is one of the biggest homes in the area so it is kind of hard to price it. You can’t really skip over to the next neighborhood and pull those in as comps.

J-As a lender, I get people all the time that are not qualified to buy but then inquire about lease/purchase. There is interest in that type of property. It’s weird that it’s hard to locate. You have people with a credit issue but have a good job and there are restrictions on when they can buy.

S-Most people want a minimum 1 year lease.

J-Sometimes when people don’t want do do a lease/purchase option they will exchange earnest money instead.

S-Usually you are signing the contract when you are signing the lease as well. The benefit is that you get to try out the house first.

A-John Charlton with USA Mortgage is our special guest. He has been on the podcast many times with mortgage updates. Shannon has put together this big list of questions. What we are hoping is that people will ask their questions on Facebook Live. I was just eating dinner and a guy called me about buying a house. The first thing I said is you got to call John to get pre-approved.

S-I would like an update on the tax reform.

J-One of the things that is kind of strange in the economy is that typically mortgage interest rates go up when the economy is booming. What is happening in the market now is puzzling because the interest rates are staying low. Right now it doesn’t mean a whole lot because interest rates aren’t doing much. There is anticipation they will go up over time and The Fed will be raising interest rates as far as The Fed Funds Rate. The short answer is I don’t see a whole lot of difference. If you are in a position to buy a home or you need to refinance, that’s still the same basic criteria.

S-I thought interest rates jump when they pass reform.

J-The one thing the market is good at is anticipating where this administration is going. We don’t see big huge moves on a given day right now. There haven’t been any major events that have surprised the market. Most of the people knew the tax reform was going to come through. The markets already priced it. It’s a great market right now. Interest rates are an eighth higher than last year so it’s still a great time to buy.

A-I can remember when 6.5 was a good rate.

S-A couple concerns that were in the tax reform was you’d no longer be able to write off the interest on your loan.

J-That’s not happening. In our area we are not too much impacted by the so called negative things. We do not have high property taxes like in New York which is capped at around $10,000. Cook County in Illinois is panicking because their property taxes are so high. In St. Louis you really need to be a $1,000,000 plus home.

S-You can still write off the mortgage interest?


S-What about the capital gains which is 2 years? I think that’s a big deal for first time home buyers.

A-I think you’ll need to ask our CPA that question.

J-Usually they are going to buy another house and essentially rolling that investment forward. I forget the term for that.

A-1031. I bet the 1031 guys are chomping at the bit. It’s kind of a foreign term to most people. It is a like kind exchange. It sound like a lot more of them will be happening if it goes from 2 years to 4 years. It’s interesting you read the tax reform and thought about mortgages.

S-I’m thinking about the first time home buyer who gets a smaller house and thinks they will upgrade in 2 to 3 years.

J-What I always tell people about home buying is that it’s a place to live. It’s also wealth building. That person that buys that house, and you may have tax penalties, will still gain wealth vs. paying rent for 5 years. That’s the key there. Those root causes never change and no tax policy is going to take away that advantage to being a home buyer.

A-It’s so interesting that we are on Facebook Live. I know for a fact that there are people listening. Next let’s ask about the max concessions for different types of loans.

S-Closing costs that the seller pays that the buyer requests in their contract.

A-Buyers often ask sellers to pay their closing costs so this is nothing new but with the recent changes to the Realtor contract, now they have added a line so there is a box to check. This will continue to be a big part of our deals.

S-It’s in writing in the contract as of 2018.

J-This is fascinating to me and it has more to do with you than me. The truth is in St. Louis I almost never see a contract without a concession from the seller. That’s taking advantage of a market. The person that is selling the home is selling it to them for less than what it will appraise for. If it’s a $200,000 deal with 3% concessions, they are selling it to you for $194,000. It still has to appraise for $200,000. When you are thinking about it, what’s $6,000 in value. In other markets it’s not like that. A buyer may ask and the seller says no way. I do deals in Colorado and in Denver there are no concessions and most sales are for more than what the asking price is and more than it will appraise for. That makes it a major appreciating market that is a seller’s market. You asked what the maxes were. On government loans it’s 6%. On conventional loans it varies. If you put less than 10% down you can only get a 3% concession. 6% on 10-20%. 4% on VA loans. With a 6% concession you’ve already got thousands in the home.

A-On the VA rider it says something like the seller will pay buyer’s closing costs required by lender. Is that insinuating that on all VA deals sellers have to pay all the buyer’s closing costs because a VA buyer is not allowed to bring any money to the table?

J-The realty of the VA loan program is it’s meant to be 100% financing. Is it 100% financing if there is closing costs? That’s debatable. The seller can do a concession for that $4,000 so the person gets the 100% financing. Banks don’t charge bank fees on VA loans. They are limited on how much it can actually cost. The VA is meant to be 100% financing and God bless people that serve the military.

A-If they buy a $100,000 house, is their loan $103,000?

J-If you receive VA disability you are exempt from the funding fee. It is 100% finance truly. If it is a normal person discharged from the military there would be a fee added to the loan but not paid out of pocket. VA on refinancing is 100% financing. Anyone with a military background should be looking into VA loans.

A-You gave me a rough formula one time for what closing cost percentage would be. On $100,000 it’s about 3% but it’s not always 3%. What’s your formula.

J-I like to think about where most people are. 3% is a great number unless the house is over $250,000, and after that it will be slightly less than 3%. Under $100,000 might be more than 3%. The calculus depends on the county, insurance, and other costs. If you go in anticipating 3% you are generally right.

A-When you say closing costs do you mean pre-paids and appraisal?

J-I don’t include inspections. I do include appraisal. I’ve seen $300-$1,500 inspections so they run the gamut. I don’t require any inspections as a bank except in certain instances like termite for VA loans and the seller has to pay for that. If you are in a rural area you need well and septic inspections. It’s not included but it can be if you need to stay under 3%.

A-I used to argue what the term closing costs meant but now they’ve clarified it on the contract. I loved arguing that because there was a separate paragraph called closing costs that included appraisal and inspections. Some lender wanted us to say pre-paids and buy-downs. It’s in there automatically now.

J-A seller told me they didn’t want to pay their insurance for a year but they agreed to the 3% so what are we talking about here?

A-Will we be asking for closing costs more often now? I don’t know. I think they will be more likely to accept that as a normality since we no longer have to hand write it in.

J-I think it’s good just because it’s full-disclosure up front. People can make a decision quicker. It’ll be easier to compare offers with that. 26:38

 A-Let’s wrap up the meat of the segment. We’re going to jump into the 5 questions I like to ask. Who lives under your roof?

J-Myself. My wife. My daughter. My dog. That’s it.

A-I got that question from Trey. Where are you your best?

J-That’s a strange question. With a beer in my hand on a beach.

A-Do you have a favorite blog or podcast or book?

J-I read a lot of books. Blogs not so much. I read a lot of news.

A-Where do you get your news?

J-I get my news from everywhere except for Facebook.

A-I sort of asked a political question on accident. What’s your guilty pleasure?

J-Steak sandwiches from The Post on Fridays.

A-Who is your mentor and how have you thanked them?

J-I’d say my brothers are my mentors. I grew up with my mom and my 3 older brothers. All of them had a different vision and had a different personality. They were kind of my 3 dads.

A-How have you thanked them?

J-Love and gratitude, bro.

A-This wraps up our segment. Thank you, John Charlton and Shannon St. Pierre. Thanks for watching and take care.

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