BiggerNews September: Mortgage Rate Predictions

David:
This is the BiggerPockets Podcast, show 658.

Mat:
… is that I control my own success or lack thereof success. Work ethic and attitude drive success. Money will always follow. Stop focusing on just the dollars, focus on, if you find a good property, buy the property. You’ll figure out a way to make it work. Money follows success, not the other way around. It’s not always about the exact penny. People that focus on every penny all the time end up making money, but not being as successful, making as much money as people that focus on winning and building a bunch of properties and getting a bunch of opportunities and you will make money. Money follows success is the biggest thing I live by.

David:
What’s going on, everyone? This is David Green, your host of the BiggerPockets Real Estate podcast here today with a bigger news episode with one of my favorite co-hosts, Mr. Dave Meyer. Dave, good morning to you.

Dave:
Good morning. I’m sure you say that to all your co-hosts, David. You’re just trying to flatter me.

David:
No, you did such a good job today. I actually messaged Dave when we were recording this that just like UFC gives out a knockout of the night, Dave should get a bonus for asking amazing questions during the show.

Dave:
Thanks, man. I know sometimes I feel like I’m the guy who gets called up from the minor leagues for a spot start every once in a while. But I’m trying to earn my permanent roster, my permanent spot on the team. So I appreciate that feedback.

David:
I see the manager calling for the lefty. Pretty, pretty more-

Dave:
I like it.

David:
… much more often in your future. So in today’s show that Dave and Dave’s tackle an interview with Mat Ishbia, the founder and CEO of United Wholesale Mortgage, one of the biggest lenders in the entire world. So if you aren’t sure how the lending space works, which I wouldn’t be surprised because I didn’t know for a very long time, Mat’s company provides the money that local mortgage brokers use when they originate a loan to give to you, to buy real estate.
His company is well known as probably the most efficient and best run and well-liked company that every mortgage broker I know wants to use. And Mat shares some of the principles that he’s used to build this as well as how mortgage brokers can actually help you get better rates and do better deals. Dave, what were some of your favorite parts from today’s show?

Dave:
Well, I thought the most fascinating thing is just how much money you save by using a mortgage broker over going to a large bank. And I won’t spoil it, but it’s way, way more money than I thought it was going to be. This is not $50. This is a considerable amount of savings. And so that was really eye opening.
And honestly, I think just understanding a little bit better, the nuts and bolts of how the mortgage industry works is really helpful for real estate investors. And I mean, let’s be honest, a lot of things in real estate, when you first get started, they sound boring and they sound over your head. And this might be one of them, I get that. No one really cares that much about how the mortgage industry works. Until you understand that it can save you huge amounts of money and it can be you … It’s not just like this hurdle that you should be thinking about as a burden. It’s actually an opportunity to be strategic, and you can use your financing, and you can use the type of loans that you get to more effectively build a strategy.
So I know while not everyone, it’s not as glitzy as hearing about someone whose Mat racked up this huge portfolio over by the time they’re 19 or all these incredible people we bring on here. But this really honestly offers hugely practical tips that you can use to grow your own portfolio.

David:
Before bringing Mat today’s quick tip is that you should ask a local mortgage broker, what products they have specifically for investors. So the days of the 30-year fixed either primary loan or investment property being your only options are long gone. There are a lot of products that are specifically tailored to investors. These are the products that I use and my team does all the time, and they can really help you step up your game, buy properties that you might not have been able to buy before. Continue buying after you get to the four Fannie Mae and Freddie Mac loans or 10 that you get capped at, or make deal’s work that might not have worked without these types of products.
So ask about that and give a little more priority to the lenders who are familiar with products that work for investors, as opposed to just first time home buyers or primary residents people.
All right. Let’s bring in Mat. Mat Ishbia, welcome to the BiggerPockets Podcast. How are you this morning?

Mat:
Doing great. Thanks for having me.

David:
Yeah, we are very lucky to have you. So I know who you are, but many of our guests probably won’t. Would you mind giving us the 30 to 60-second spiel on your background and how you got to where you are today?

Mat:
Well, glad to be here. So, Mat Ishbia, president and CEO of UWM. We’re the largest purchase mortgage company in the country for a couple years, largest wholesale mortgage lender in the country as well. And I’m a mortgage guy. So we’ve been in the mortgage space. I got to this company when it was a 12-person. Now, we have about 8,000 people here in Pontiac, Michigan.
We work with independent mortgage brokers. So you’ll never see our company on TV commercials, because we’re the backroom for so many small mortgage companies throughout America. And we help make them efficient, help them close loans fast, help them deliver better rates and fees to consumers. And so we’re the largest wholesaler and the largest purchase lender in the country. And we’re growing still. We’re growing right now.
And I’ve been here 19 years. I used to play college basketball years before that. And just love what I do and proud to be here with you guys, trying to hopefully help you guys in any way, because I know you guys are doing great things, hopefully educating a lot of people about the markets we all live in.

David:
Yeah. And for the basketball fans out there, they’ll probably know about the team you played for. Can you share a little bit about your background in college sports?

Mat:
Yeah, so I was not a great basketball player, but I was on the Michigan State National Championship in 2000. So I actually played basketball for Tom Izzo for four years, and we went to three final fours in my first three years, three big 10 championships and a national championship. I was a third string point guard. So didn’t play as much except for when we were up by 15 or 20, but that was okay.
Actually, a bunch of the players in the national, including the national player of that year, Mateen Cleaves, works at my company here at UWM. So about seven of my former teammates work here with me and so a lot of sports background, a lot of sports analogies here at UWM, my business. And at the same time, love sports but love mortgages and love the real estate market as well.

David:
I always find it funny when a Division-1 basketball player, and not just Division-1, but like Michigan State is one of the top tiers in Division-1 basketball top tier schools tells you they’re not that good. Have you heard of the Brian Scalabrine challenge? Have you seen any of that online, Mat?

Mat:
I’ve heard of him. I know who he is, and I’ve heard of the challenge before.

David:
So it’s hilarious. Brian Scalabrine is a guy that everyone makes fun of who plays in the NBA. He’s like a big slow white guy, and he looks like he’s not as good as the competition because he’s playing against the elite level players in the world. Well, a lot of people will talk trash about Brian. So Brian started to say like, “Hey, if you think you’re better than me, let’s come play.”
So he started hand picking the best guys that he could find, the top college basketball players, the guys that played overseas and semiprofessional leagues that were really good, the big athletes. And then they filmed him playing them and he’s destroying everybody. And it’s so gratifying to see that he’s like this scrub that everyone’s making fun of because he’s not keeping up with LeBron James and Kobe Bryant.
So I’m sure, Mat, you telling us you’re not that good. If any of us stepped on the court with you, you’d be running circles around everybody. That’s really funny.

Mat:
Thank you. A long time ago, I was decent, but yes. It’s definitely a college basketball and NBA is a different level, but it was a fun time back then.

David:
So now my understanding is that United Wholesale Mortgage is a company you work for. UWM is the second largest lender in the world. Is that accurate?

Mat:
Yep, that’s correct.

David:
Okay. So what do you think you did differently? By the way, let me say this. Every single mortgage broker that I know only wants to work with United Wholesale Mortgage. In fact, actually I’m known as an analogy person. I cannot come up with an analogy for what that’s like, because I don’t know any other business or situation where everybody is fanatical about only wanting to stay at this hotel or eat at this type of restaurant. It’s almost frustrating how mortgage brokers are constantly saying, “I just want to do a hundred percent of my loans with UWM. And if for some reason I can’t,” they hate their job because compared to working with you guys, it’s so terrible. It’s like anyone who’s in the mortgage space that’s listening to this is geeking out right now.
Can you tell me about the mindset behind how you built a company that people are just, they’re willing to pay if they have to pay a higher rate or maybe if there’s something unique about the situation, they’ll switch it just so they can do loans with you guys?

Mat:
Yeah. Well thank you. That’s about as nice a compliment I can get right there. And the reality is, for mortgage brokers, we are the best of what we do. But we’re only the best of what we do because of the investments we’ve made through the way. And so there’s two things that I always talk about. The biggest thing is kind experience. In any business, whether you’re mortgage, whether you’re real estate, whether you’re a plumber, I don’t care what you do. If you dominate the kind experience, you make it so that you have raving fans like you were just talking about, David, you’re going to win.
And so I’m maniacal about every detail of everything that my clients feel from the way I speak to them, the way we roll out technology, to the way we don’t compete with them, to the way we offer better rates, the way we offer services that other people, like in the way it’s all been done just to be cut to the chase is I’ve built this whole business from 12 people to 8,000 people with the focus on kind experience and dominating and winning in that event, not focused on money.
So the decisions I made at 2012, ’17 and ’21, anyone who was the owner, although I’m the owner, but let’s just say anyone else, they would say, “Why would you do that? You’re spending a million and a half dollars. What’s your return on investment?” That doesn’t work. I never think about return on investment. I think about, will this make my clients happy? Will my clients love this? Will this make their client’s realtors and consumers happy? If I do those things, I’ll win. I’ll get the … I’ll figure out how to monetize later. And that’s what we’ve done at UWM.

Dave:
Mat, when David and I were talking about having you on the show, he was raving and sort of fanboying a little bit about getting to interview you because I know he’s a big fan. Could you explain for those of us who aren’t as familiar as David is with you and your business and sort of the position your company sits in relative to sort of the end consumer? Because when you’re talking about delighting your customers, if I’m correct, you’re talking about delighting mortgage brokers. Those are your direct clients. But then they work with people like me who’s a real estate investor. Can you sort of just explain the life cycle in how an investor sort of indirectly works with your company?

Mat:
Yeah. So it’s a great question because other people were just like, “Wholesale mortgage lender, what’s that mean? You’re the largest purchase lender. I’ve never heard of you guys.” But our job is to empower mortgage brokers. So David, companies that are brokers, they are the fastest, easiest and cheapest way to get a mortgage. And that’s not my opinion. It’s supported by data and facts.
And so what my job is, is to make sure that they stay fastest and easiest. We already know they’re cheaper. So if you earn nothing from me or nothing … The cheapest way to get a mortgage is through a mortgage broker, and that’s findamortgagebroker.com. That’s not, “Oh, I saw a commercial for Wells or Chase or Rocket or these companies.” You’re paying for that commercial. Go to findamortgagebroker.com. Find someone local, that’s first.
So it’s always cheaper. My job was to give those places, and it’s always been cheaper for the lifetime, but now what I’ve done is I’ve empowered them to be faster and easier. So it wasn’t like, “Yeah, it’s cheaper to go with my friend, David, the mortgage guy. But it takes 40 days and he doesn’t have any technology. I got to fill out the thing by hand.” And what we’ve done at UWM is I’ve created the technology, created the infrastructure so that all the small mortgage brokers and some of them are small like one-person shops, some of them have a thousand people. But small mortgage brokers in America can provide speed and ease. Because the thing about my industry mortgages is no one in the world has ever woke up and said, “Hey, you want a mortgage today, honey?” Nobody wants a mortgage. They want the house, right?
They don’t want a mortgage. They want the savings. So we got to make it fast and easy. We got to make it a side thing, simple and easy. And that’s what we’ve been able to do. And so that’s what our business has been. And so where do we sit in the whole thing is you will always interface with mortgage brokers. Nobody knows who I am or my company until the loan closes. And then they pay us every single month, their mortgage payment.
And they might know us. We’re on some disclosures throughout the process. But the reality is we want the mortgage broker to look like the superstar with technology and service and we’re the back room. And that’s why, as David said earlier, they love working with us because we take that seriously. We make them look great because they are great. They are the best place to get a mortgage.

Dave:
That’s fascinating. So you’re basically both empowering the mortgage broker, but indirectly you are helping me, the investor, get a faster loan or a faster and a cheaper loan effectively than going to one of those big banks that you mentioned like Chase or Wells or Rocket.

Mat:
Absolutely. That’s exactly right. So you simplified it. I took me 90 seconds and you did it in seven. So you got it right.

Dave:
No, no, you explained it to me. So now I’m just trying to make sure I understand everything correctly. And then is your company actually lending the money ultimately or are you sort of pairing up the investors with some other private lenders?

Mat:
No. We lend the money. So we do, depending on the month, $10 to $20 billion as much as $25 billion of mortgages every month. And so we lend the money, and then what we do is we pool them and we sell loans to Fannie Mae, Freddie Mac and Ginnie Mae, just like Wells Fargo does and Chase and Rocket and Bank of America, anyone you want to talk about. We all do the exact same thing, but we retain the servicing.
So as far as a consumer will know is they’re going to pay me every month. You’re going to pay … A lot of people pay their mortgage to UWM. Over a million consumers throughout America right now, I believe do that. They don’t even know who UWM is besides that they got introduced through a mortgage broker.

David:
That is actually more valuable than people might think. So I had a situation about four years ago where my loan was sold without me knowing that it was sold. Now of course, they’re like legally required to send you a letter or something. But I’m sure it was being sent to my mom’s house because I think that’s where I live when I bought that house. The house was bought a long time ago. I set up the autopay. I thought I was good to go, it turns out that the loan was sold and the new lender was coming and saying, “Hey, you need to switch over to this stuff.” And they weren’t communicating with me by any way that modern day people do. They don’t send you a text message or an email. They just send you this letter.
And so I didn’t make a mortgage payment for a couple months having no idea. And I didn’t find out until I was like three days away from foreclosure and it was this mad rush. And it was so frustrating. I know that they’re allowed to sell loans, but there is no smooth way that we’ve facilitated this process to where the person like me that has 40, 50 rental properties and a bunch of different businesses. I’m not going to be paying attention to that one deal that I closed it. It’s handed to my team. I’m off moving to the next thing.
And so like knowing that your company is servicing them, I can see that that’s probably not maybe the most profitable way to do things. But I’m sure that that was one of the things you did thinking about the end user. If we can hold more of them on our own books than this, and we service loan ourselves, it’s a better experience for the people that are working with us.

Mat:
A hundred percent. And that’s one of the things and I can’t say we hold every single loan forever, but we try to hold as many as we can. And we hold, like I said, over a million of them. $330 billion of mortgages are being paid to us every single month. And we collect the payments and go through that process because the ease of use end for the consumer, as you’re pointing out, David, you want to make that seamless so that they, for me, so that they think, “Wow, I want to keep working with ABC mortgage broker.”
And at the same time, if they ever want to refinance, and this happens all the time, they’ll call me and I’ll say, “No, no, I don’t do it. Call ABC mortgage broker.” And that’s part of the partnership why mortgage brokers love us as well.

Dave:
Mat, why is it cheaper for a consumer or an investor to work with a broker rather than going to one of the large and recognizable brand names out there?

Mat:
Yeah. So I’m going to give you this answer and then you’re going to have to help take it to seven seconds again, like you did on the last one, because-

Dave:
Okay.

Mat:
… the reality is because mentally people think, “Why would I go to the middleman? I can cut them out and go …” And the way I would explain it to people is this, going to the broker gets you a contractor’s discount. Think of it that way. Like if you’re painting your house and you go to Sherwin-Williams or a big paint company, you buy a bucket of paint. Well, the contractor that buys hundreds of buckets of paint gets it cheaper. Even if it’s the exact same paint, he gets it cheaper.
And so that’s the same type of concept. You get a cheaper mortgage because you’re going to someone that does a lot of them and I have to give my wholesale pricing, my best rates, to you to get that broker to use me rather than use someone else. But when you come directly to a retail lender, Wells Fargo or Rocket, they’re giving you their retail pricing. Like you’re in the store, you don’t get a contractor’s discount.
And because you’re there, you’re already captive to them. It’s really hard to shop a mortgage. It’s not like shopping for a paint like my example. It’s hard to shop a mortgage. You got to get your credit pulled. You got to get your income docs. You got to get an appraisal. It’s like, you’re already, you’re in there. And so a mortgage broker has that ability of going and say, “Okay, I got the borrower. I got all the information. What do you guys got? What are you offering?”
And even after paying the mortgage broker, it’s still cheaper by a lot. The HMDA Data, which is Home Mortgage Disclosure Act for 2021, the data just came out and this is not my data. This is the government’s data. And on average, $9,400 cheaper for that borrower to go through a broker than the retail lender. And it’s crazy, $9,400. And it’s about $4,000 in the first five years. But over the life of loan, it’s $9,400. But even at $4,000, we’re not talking like 88 cents. I’m talking about real money here.

Dave:
That’s fascinating. And that totally makes sense. I don’t know how to summarize that in seven seconds, but I think you did a great job explaining it. While I have you here, I have always wanted to ask someone this, and I think I have a decent understanding. But for our audience, I think it would be helpful to understand like what happens sort of behind the scene, because we’re seeing this environment where interest rates are going up. And I do want to stress to everyone that the Fed does not set mortgage rates. That is not how it happens. So Mat, could you tell us in simple terms, I’m going to put you on the spot here, how it does happen and how you do arrive roughly at the rate that consumers ultimately wind up paying?

Mat:
Well, it’s all tied to mortgage-backed security. So if you really want to see what mortgage rates are, look at mortgage-backed securities for it, and you got to look out for mortgage-backed securities. Then you also have to add in what the government takes. So for instance, the rate that we’re watching today for instance is the 4% coupon. No one wants to care about this. This is not simple. 4%, you have to add basically 50 basis points. So that makes the base, 4.5% is about as low of a rate as you get today.
Most people are getting between 4.5% and 5.5% today. Now, this is the beginning of August. I know the show will be live in September. It could be 6% by then, it could be 3.5%. But most likely I’d say, if you’re working with a mortgage broker right now, you’re in the high fours to low fives. If you’re working with a lot of retail lender, it’s the mid-fives. But mortgage-backed securities is really how rates are set, not the Fed.
The Fed is indicative in a lot of things. It follows it, but it’s not indicative. There’s a lot of other things. You’re going to look at the 10 Year Treasury, but the mortgage-backed securities, if you want to really know what rates are doing, that’s where you focus.

Dave:
So can I ask you to play fortuneteller here and tell us where you think rates are going in, let’s just say, the next six months?

Mat:
Well, honestly, what I think is rates are going to be higher than they are today. I think rates are going to be between 5.5% and 6.5% consistently from, let’s call it, the fourth quarter through the first quarter of next year. That’s kind of what I envisioned. Now once again, I’d be making a lot more money doing a lot of the things if I actually could predict rates.
So I have no real idea, but based on the things I see and the data I see with inflationary, a lot of things, I think rates are 5.5% to 6.5%. So right now, it’s actually, they take a little dip. If you ask me about 30 days ago, they were in that range. They took a little dip. Now, they’re on their way back up, people think. But who knows? And we’ll see what they actually end up being.
But the reality is this, people will say, “How do I time the market?” I bet you guys probably get this all the time. Real estate housing value is going to go up or down, and what are rates doing? I’d say, “Listen, if you’re going to hold the house for more than a year or two, buy the house right now.” Stop trying to figure it out. You’re like, “Oh, it was selling for $400,000. Now, it’s selling for $396,000. I really did a good job saving $4,000.” Yeah. Well, rates are up a half point more. You just paid an extra $82 a month. You didn’t win.
Stop trying to time the market. I’m not that good. You’re not that good anyways. The reality is timing the market is very hard to do.

Dave:
Completely. And I just want to clarify that when you’re saying 5.5% to 6.5%, you are referring to owner occupant primary residency? Just because for a lot of our audience is investors and they’re probably like, “5.5%? I would kill for 5.5% right now.”

Mat:
Good point. Yes. And that same thing with what I was saying with 4.5% to 5%, with the way Fannie Mae and Freddie Mac and a lot of investment properties are, they’re probably a point higher in rate than what I’m saying. So if I’m saying, they’re 4.75% to 5.25% right now, they’re probably more like 5.75% to 6.25% right now. And once again, this is early August. When this is going live on your show, it’ll probably be another couple weeks down the road. And so that’s a little different time and it changes every minute of every day.

David:
A funny thing just happened to illustrate the point you’re making. I believe the Fed just raised rates, was it yesterday or two days ago?

Mat:
Yeah, on Wednesday last week, yep.

David:
Well, didn’t we just have another 75 basis point hike? All right. Well, rates for mortgages went down after the Fed rate went up. Can you illustrate like in practical turns why that happened?

Mat:
Yeah, and it went down quite a bit back to the point like who knows what’s going to happen next? And it’s because it’s not directly correlated. So what happened was everyone was expecting the Fed to raise it 75 basis points. I’m giving you kind of a high level view of it. But some people thought it would be a 100 basis points. And so some of that was priced in the market. And when it came out at 75, it’s like, “Oh, the market rates went down a little bit.”
And so it’s kind of like what people think and what Jay Powell says. And there’s a lot of different things. It’s not an exact science. And that’s why back to my earlier point about finding a mortgage broker, someone that’s shopping on your behalf and has options, has different lenders because every lender interprets it differently too. And some places put bigger margins in because they’re not sure what’s going to happen. And now you’re paying a higher rate for the next 30 years because you didn’t go to a mortgage broker. It’s the same concept.
That’s why shopping around and finding a local broker that can do that, because everything’s different. It’s very volatile.

David:
Yeah. So if I hear you right, what you’re saying is that the people know in the space of how they price loans. So they’re actually thinking about the end buyer when they’re pricing that loan is, “How cheap can I make this rate so I can sell more of the loans. But if I go too cheap, no one’s going to buy the loan from me.” So they’re playing this balance. That’s what business is, how supply and demand works.
And they know that the Fed is going to raise rates. So they’re trying to figure, “Well, how much are they going to raise it so I know where to price mine now? Because if they go too high and I sell loans for too low, I won’t have an end buyer to buy them. They’ll buy all of the new ones at the higher rate. So they bake in to their rate where they think the Fed is going to take prices. And then if the Fed doesn’t raise it as much as what people expected, they actually can adjust to come back down. Is that accurate?

Mat:
In general, I would say there’s still people that will buy the loans either way. It’s just you lose money or you make more money or you don’t have … And so that’s where some places, that’s how people get bigger margins and they, “Oh well, this price loan is worse.” So when mortgage market or any market is a lot of demand, but not a lot of supply, pricing gets worse. And so same thing in the mortgage market. So yes, in general, you got it right that the mortgage market and rates are tied to, people are trying to interpret what’s going to happen. And that’s how the mortgage-backed securities are all tied to rates. And then obviously the servicing rates.
So a lot of complicated thing, but the reality is the simple answer is rates are 5.5% to 6.5% is what I think for the 30-year fixed single primary, and think about a point higher for investment properties. But everyone is a little different. That’s why brokers can shop on your behalf.

Dave:
Mat, I’d love to switch gears a little bit here and ask you about trends that you’re seeing in the types of loans that people are applying for. Because over the last couple years with interest rates pretty much as low as they’ve ever been, it was sort of a no brainer for people to lock in fixed rate mortgages, at least in my opinion. Now, I’m seeing a lot more interest relatively in interest only loans or adjustable rate mortgages so that people can temporarily, or permanently depending on the loan, have a lower interest rate than getting the 30-year fixed rate mortgage, which for anyone listening, is generally the most common type of mortgage. So are you seeing those types of trends? Are the types of loans and the types of products you’re selling shifting a little bit?

Mat:
A little bit. I wouldn’t say it’s massive. Right now the yield curve in the market is still inverted, so it’s not … You don’t get the benefit of the adjustable rates like you could. So to go from a 30-year fix to a seven-year ARM, you might save three-eights in rate, which by the way if you’re not going to hold the mortgage for more than seven years, it’s a lot of savings. But a lot of people, if you’re buying a bunch of investment properties that you’re talking about, you don’t want to sit there and worry about every single mortgage all the time.
And so 30-year fix is safe, secure, solid. Payment doesn’t change. You’re good to go with it. It’s still by far and away like the number one product, like over 90%. So it’s still the right one that a lot of people go for. However, being creative, the biggest thing that I’ve talked to people about is although mortgage brokers can provide lower. Anyone gets you a lower rate, just how much fee you’re going to willing to pay. And so it all comes down to the payment.
And so payments is everything, in my opinion, whether it’s interest. And what payment you can comfortably pay because down payment, also people are like, “Well, if you put no money down, it’s different than you put 30% down versus where you put 50% down.” And so it’s all about cash flow and payment. And I know in the investor world, which a lot of people that watch this podcast, understand that better than I do.
And so I think it’s understanding those products, but there are more products coming out and there are things that are much more. There’s buydown products, there’s ARM products, there’s interest only products. There’s different things. There’s 80/20s. There’s all these different nuances.
Once again, if you’re not a mortgage person, everything I just said is boring and you don’t want to hear about it. That’s why it’s like talk to a mortgage person that’s an expert, and they’ll educate you on what works best for you. But talk about what matters to you. People call and say, “I want the lowest rate possible.” Okay, that’s not what you really want. You want the lowest payment for the least amount of fees. You want to close fast and efficiently. You want no hassle. Let’s talk about what you really want and we’ll serve you up with that product.

David:
Before I knew the difference between retail lending, mortgage brokers, these were all relatively new terms that I didn’t learn until I started the One Brokerage. I would go to my job as a police officer. I would Google like Phoenix, Arizona banks because that’s where I was buying. I would look at this huge list or make a spreadsheet and put in all these rates. Then I would call every single one of them and I would say like, “Can you do a loan?” They would ask me to fill out application.
And I was just all day long doing this to try to find the better rate. I just did not understand that not all loan officers were the same. I actually didn’t even understand the difference between a lender and a loan officer. In my mind, that was the same word. And then I realized that there’s mortgage brokers that will go out there and find me all those different banks who has the best rate at that time. It blew me away. I also felt like a complete idiot for spending so much time doing something that was completely useless.
Are there other things like that, Mat, that you found in your experience where maybe the end user thinks that they got to do all this work, but there’s actually a system in place that would save them time, save them money, help them find the best rate with the best fees and the best closing time?

Mat:
Yeah, I think there are. And that’s a great question. And it is not unusual what you went through and that’s how most people still are. And that’s one of my jobs of why we’re a public company, is I want to educate people, educate consumers, educate people about the reality. And the difference between all the other industries and things that you’d be talking about, David, that have others things like this and a mortgage is a mortgage you do once every four or five years, so not very often. And obviously you’re buying house, but not very often.
Second thing about it is it’s such a big financial thing. This is not like buying airline tickets. Oh, there’s a better way to buy airline tickets, save me $69, $49. That’s cool. But this is thousands of dollars. This is meaningful life-changing stuff we’re talking about. And so I don’t know of another industry that’s that substantial of a difference in dollar amounts that is so misunderstood. And the reason it’s so misunderstood, it makes sense is why is it so misunderstood? It’s because these big lenders that make all this money, they want it to be misunderstood because they want to be able to charge higher fees.
And David, you probably know this a little. In the mortgage world, people don’t like me because what we’ve done is we’ve changed the game. We’ve educated people and we’ve democratized this where lower rates and lower fees is not for only the people on the inside. You just got to find a mortgage broker, you get lower rates and fees and these big lenders do not like that. We’re giving this out to them and making it so it’s so easy to do mortgages. And that’s how my company’s grown from 12 people to 8,000 people because we’ve been winning and by helping brokers win.

Dave:
One of the things I regret not knowing about earlier in my investing career is that you don’t always have to use your personal and property income to qualify for a loan. And there are other products like that use basically the property’s income to underwrite the loan. Do you underwrite those types of loans, first of all, I guess I should have asked?

Mat:
Yeah, a DSCR loan is what you’re talking about? Yeah, we do those loans at UWM as well. And we recently rolled them out maybe six months, nine months ago. I don’t know the exact time but this year at some point. And we’re actually doing a lot of them. And so yeah, there’s ways to do that where you don’t have to qualify with your primary 30-year fixed income and let me see your W-2s and pay stubs. There’s different ways of doing it.
But once again, I’m going to keep saying it, but it’s not because I’m trying. You got to find an expert. You just got to find someone that knows this stuff. Back to David’s question a minute ago about other industries, the way I always try to analogize it is like a doctor. I had shoulder surgery before, both shoulders actually. And I don’t go to my general doctor, my general practitioner and say, “Hey, can you do my shoulder surgery?” I’m like, “Hey, I’m getting to need a shoulder surgery. Who’s the best shoulder guy around?” And he goes and finds it for me.
I don’t look, type in and Google, good shoulder surgeon. That’s not how you do it. You find that your main … That’s what a mortgage broker is. They’re basically your general doctor that will find you the specialist for your investment property, for your primary, for your DSCR loan, for your 30-year fixed, for your ARM loan. They know the right people for that. And that’s how I kind of use that analogy of another profession that matters a lot. And that’s like a medical profession.

Dave:
Okay. That’s interesting. So first, let me just clarify. DSCR is debt service coverage ratio, excuse me, which is … No worries, which is basically the ratio of how much income a property is generating against the mortgage payment. And so if you have a higher DSCR, that means that your income is covering more and more of your mortgage payments. And that makes a lender generally feel pretty good because you have more cushion and your ability to pay your mortgage is higher. The probability that you can pay your mortgage, I should say is higher.
But that’s really interesting what you were saying, is that different mortgage brokers will specialize in that type of loan, which generally speaking is for investors versus someone who really specialize in owner occupant primary residence kinds of loans. So, there are different types of brokers you’re saying?

Mat:
What I’m saying is there’s different type of lenders. The same broker you’d go to, the mortgage broker, and they’ll know, “Hey, Mat at UWM, they’re the biggest. They’re best at purchases and 30-year fixed rate. But oh, it’s a DSCR loan with a 0.80 ratio rather than a 1.15 ratio. I’m going to go to XYZ lender versus,” and you wouldn’t know that, like how would you know that? That’s not your life.
So the broker will find it. Same thing with the doctor. There’s a doctor that knows the best shoulder guy. My main doctor will tell me who the best shoulder guy, but it’s a different guy than the best knee guy versus the best ankle guy, or a heart guy. So you got to go to those. But I still go to my same doctor, same broker. They’ll find the right lender.

Dave:
That’s super helpful. Thank you. Honestly, I’ve just started getting into these more creative types of loans and it can feel a little bit overwhelming, honestly, to try and track down different banks. And you feel like you’re talking to all these different people and trying to keep these rates straight. I’m not doing what David was doing and calling like 30 local banks, thankfully, but it does feel overwhelming.
So, if I’m understanding you correctly, you’re saying that a good broker can match me with a light lender. Could you share with us, perhaps some things that you could look for when you’re interviewing a broker or trying to meet a broker that can help you shop for these different options?

Mat:
Yeah. So I start with findamortgagebroker.com. It’s a website. These are not just my brokers. These are brokers throughout the whole country. And they’re ranked based on how fast and efficient they are with getting mortgages done. And it’s very simple. So you go in there, you type in your local address, you find a local area. That’s where I start.
But on top of that, when you’re interviewing a mortgage broker, what you got to figure out is how long is this going to take to close? Because you say, “Well, I don’t care if it takes 30 days or 40 days,” but if they can close it fast, you know first they’re efficient. And if they’re efficient with their closing process, they’re probably lower costs because something takes 60 days, there’s probably more work, which means they’re going to charge you more. And so I’m always about speed and certainty.
And then I always asked, “Do you have any references that you’ve closed loans with recently that have closed faster? You have any examples?” Because I want to see someone that’s closed it fast. And I’d Google them the scores. I’d Google them, findamortgagebroker.com has reviews as well. But that’s how where I’d start. And then I’d see how it works and how responsive they are because there are loan officers and mortgage brokers that can close, like they aren’t responsive. And I don’t want to work with somebody that’s not responsive. Everyone needs something different.
And so you got to find someone that works well with you. But I’d start with findamortgagebroker.com. Find out where they are. Are they local? And are they fast? If they’re local and fast, I feel good about it. But you’d say, “Well, they’re not on this findamortgagebroker.com website, Mat.” I’ll tell you if they’re not on that website, they’re retail. And if they’re retail, they’re charging you $9,400 more on average. It’s that simple.
“Oh, don’t worry about that. We’re not on that website, but …” That’s because you’re not a broker. That means you’re only funneling me to one set of products. This same doctor is doing all the surgeries, knee, back, elbow. That’s why I have to do it that way because I’m a retail guy. That’s why brokers are better.

Dave:
That’s really good advice. As the old saying goes, it’s old but it is true that time is money. And that if it is going to take a broker longer to close a deal, they are paying someone and they’re going to pass those costs along to you. So that’s great advice.
And I just want to say, especially after the last couple of years, not only do you save money by having a lender who can close faster, but also your bids become more competitive. I’m sure, David, you can attest to this too. But if you were putting in an offer the last two years where you’re like, “I’m going to close in 30 or 60 days,” the seller wouldn’t even look at it. A lot of things, hopefully most people were looking for cash, but if you were going to go in and try and buy with a loan, you better be under 30 days.
Obviously, things are changing now, but it does allow you to be more competitive and give the seller some more assurances if you can close faster. And it sounds like this is something you can look for when you’re shopping for a broker.

David:
Well, the point is the more skilled that the loan officer is, the more they anticipate what the underwriters would need. Rather than waiting to send it off and have an underwriter come back and say, “Here’s what I need,” they gathered it up front. They set expectations with the client. They didn’t dribble themselves into a double team and then look up and say, “Ah, somebody come bail me out.” They recognize, “Oh, I don’t want to go in that direction. Let’s go in this direction,” so they don’t turn the ball over as often. I finally get analogy in there for you, Mat.
The last thing that I want to ask you about is you’re in the business you work in the weeds. And I know that you are a big proponent of not backing out of the business so you don’t know what’s going on. But from viewing the economy, that there is an element of where you need to get up in the watchtower and sort of look over and see everything that’s below. What are your thoughts on the direction you think the economy is going to head into? Are we heading into a huge recession or depression where we’re going to see decimation to the real estate market? Are we going to see higher rates for a time and then they might come back down?
In general, how are you positioning UWM to navigate the future, and what advice do you have for those who want to own real estate?

Mat:
Great. So you know the first simple thing, let me answer real quick. First off, if you want to own real estate, right now is a great time to buy. It’s without question. Rates are going to be higher, so if rates are going to be higher, I want to buy now. And values are going to go up. And then you hear them say, “Well, are you sure values are going to go up, Mat?
Let me talk about that. Let tell you for sure. The biggest question I get is like, “Are the values going to drop? Is this like 2008 again?” Nothing like this. This I can confirm with a hundred percent certainty. 2007 and ’08 was built on a foundation of a broken mortgage market. My fault, not mine because I wasn’t really big back then but as in mortgage people’s fault. No one else’s fault. Mortgage people did it wrong.
The rules have changed. The governance has changed. It ain’t happening again. That ain’t happening, I’m sure of it. That I can tell you because I live in this every single day of my life, the foundation. So you’re not going to see this like, “Oh, he sold his house and she foreclosed and the adjustable rate mortgage and they can’t afford it.” That ain’t happening anymore. So the crash of ’08 is not happening now. So, kudos to the CFPB and all the government agencies that actually did a good job of reeling in that issue so that won’t happen again. So, that’s first.
Now to answer your question like recession, inflation, I’m not the best at that stuff. I’m a one trick pony. I’m a mortgage real estate guy. I live in this world all day. Do I think the economy’s gotten headwinds? Yes. Do I think the world’s going to like, no, I don’t think this is like this. I think people like to talk about things. They sensationalize everything from and anything that goes on. Whatever’s on TV, they’ll sensationalize it. I don’t think it’s as bad as people are going to say it’s going to be. Housing values are not coming down. If they come down, it’s like from 400 to 397. It’s not like 400 to 297, right?
It’s a different world. It’s not a big change and then go back up. So, housing values used to be 1% to 4% a year and then they’ve been 15% a year the last couple years. So will that continue? No. It will probably slow down a little bit where it’s more normalized appreciation of 1% to 3%, 1% to 4% a year. And with rates being higher, rates will come back down. I think they’ll be 5.5%-6%, 6.5%-7%. And then they’ll come back down to 5% or 4% or 3%. That’s going to happen.
These are cycles, right? The market’s moving cycles. The industries change. You just got to be close to it. And that’s why it’s so great to have you guys educating people and having an expert on your side on the mortgage side, real estate side. Go to the experts. I don’t know different things about credit cards. That’s not my world. I go to the guy that knows credit cards best. Use the experts and dominate in your field. And that’s how I think about it.
And so I’m not great from the highest level of the whole economy and consumer spending and inflationary causes and how people are saving their money. I’m not the best on that, but I do understand the real estate market and mortgage market pretty well. And I’m pretty sure about the things I just spoke on and I feel confident in those.

David:
All right. Well thank you, Mat. I know you’ve got another meeting to get to and we really appreciate you carving out some time for us today. I think what you just said is very helpful. You don’t see a crash coming, rates are going to continue to fluctuate up and down. They’re probably … I don’t even think rates are high right now. This is probably just a healthier place in general, for them to be. We’ve been spoiled for such a long time with low rates.
But one thing that I always keep in mind is if the deal works at the rate I’m at right now, it can only get better. Worst case scenario is I’m locked in. Rates are kind of like ratchets. They go down and you can refinance. And if they go up, it’s fine because you’re locked in unless you’re doing a lot of adjustable rate stuff. And a lot of these DSCR products we talked about are still 30-year fixed rate terms. They’re not risky. It’s just an underwriting standard like what we’ve used for commercial real estate for a very long time finally making its way into residential because they’re investment properties. They’re not primary residences. So there’s nothing wrong with underwriting them that way.
Any last words that you want to leave our audience with or words of wisdom that you can share with us for just in general, how to be more successful at the goal of building wealth?

Mat:
Well, from a big perspective, one thing I’ll say which we didn’t get to really talk about it. But like I’m real big on money follow success. We talked about it briefly, but work ethic and attitude drive success. If you’re a real estate investor, you’re a business owner, you’re someone who wants to be one, you drive your own success. That’s the biggest thing I’ve learned in my 19 years here, is that I control my own success or lack thereof success. Work ethic and attitude drive success.
Money will always follow. Stop focusing on just the dollars. Focus on, if you find a good property, buy the property. You’ll figure out a way to make it work. Money follows success, not the other way around. It’s not always about the exact penny. People that focus on every penny all the time end up making money but not making being as successful or making as much money as people that focus on winning, and building a bunch of properties and getting a bunch of opportunities and you will make money.
Money follows success is the biggest thing I live by.

David:
That is awesome. Thank you very much from that, Mat. And I think your career has highlighted that that is absolutely true. Dave, do you have any last words before we let Mat get out of here?

Dave:
Mat, this was great. Thank you so much. You allowed me to ask a lot of questions I’ve been storing up for years to ask someone who’s qualified as yourself to answer. So, I really appreciate your time.

Mat:
Well, thanks for having me guys. Keep up the great work. Really appreciate you, and I hope to talk to you again soon.

David:
And that was our interview with United Wholesale Mortgage’s Mat Ishbia. Man, that guy brought a lot of value in a short period of time. What did you think, Dave?

Dave:
I think if he considers himself bad at basketball, we have no hope for feeling good about ourselves ever again in our lives.

David:
That is a great point.

Dave:
That was what I took away. I was like, man, this guy’s either really humble or I’ve accomplished absolutely nothing in my life.

David:
We didn’t get into it, but he’s actually a real estate investor himself. So my partner, Christian, and I flew out and were able to meet him and his team in Pontiac, Michigan. And they bought the entire facilities. I don’t remember which auto maker it was. It was like Ford or GM, or one of the huge ones that went under in the Detroit area where they manufactured cars.
So when those companies went bankrupt and everyone sort of fled Detroit, Mat stepped in and bought the building, that humongous buildings and then linked them all together that he then took the company and put them in there. And I think they’re one of the biggest employers in that area. But he got it at a great, great price. So it just goes to show like real estate investors come in all shape, sizes and colors.

Dave:
Yeah, that’s very impressive. And if you look at home prices in that area over the last couple of years, I’m sure he’s made an absolute killing. But in all seriousness, I think one of the things that I admit I took too long to understand in real estate investing is that what type of loan you get, the type of relationship you have with a lender is not just like something to check off on a checklist.
And I understand that when you’re new, getting that first loan and finding the financing for your first deal is extremely intimidating, because you’ve never done this before. And you’re like, it seems like this adversarial thing where you’re going to have to beg people for money and you don’t know where it’s going to come from, and that is scary. But as you evolve as an investor, you realize that lending and the type of loans that you use is hugely strategic and can make an enormous difference in what type of cash flow you get, how quickly you’re able to scale.
And that’s why I love this interview so much is because it is so helpful to understand the types of loans you should be looking for, the types of brokers that are best equipped to get you those loans. And honestly, just like how the mortgage industry works so you know when you go and talk to a mortgage broker, what are they doing with your information and how do they come back with this magical number that dictates whether your deal is going to work or not?
So I thought Mat was a really great guest. He did a very good job explaining all of that.

David:
Yeah. I was thrilled with how well that came out. If you guys would like to learn more about how a mortgage broker can save you money, check out BiggerPockets podcast episode 598, where I get into a bird deal that I’m doing right now. And on that deal, my mortgage broker ,who’s also my partner in the One Brokerage, Christian, was able to find a product that allowed me to use the appraised value of the property, not the purchase price. And because it appraised for significantly more than I paid for it, my down payment drop from 20% to 12% or something like that.
And I was also able to borrow some of the money for the rehab as well. So the total cash that I had to put into that deal was significantly less because Christian was intimately familiar with my file, my books, the way my business works. And then when he takes that knowledge and then pairs it with the products that he knows that are out there, he actually brought that to me. I didn’t have to say, “Hey, can you find something to do this or that?” Christian came and said, “Hey, do you want to save on down payment? I’ve got this bridge loan product.”
And that’s a perfect example. If you don’t have a person like that advocating on your behalf, acting as a form of a fiduciary, you’re going to think, “Well, I got to go ask a bunch of questions and I don’t know what questions to ask.” Then you get anxiety. Then you start listening to a bunch of information about the lending world that kind of goes over your head like you said, Dave, and then you get overwhelmed and you just back out. So like we’ve said before, real estate is a relationship business. Having relationships with the right people makes your job so easy.
And now I’ve got this other tool in my tool belt. Now when I’m taking down deals, I can say, “Hey, do you think this might work?” And I have better chance of having that happen. You had any experiences like that, where there’s been someone in your business that just had your back that you weren’t even expecting them to do?

Dave:
Yeah. I was actually just thinking about this. So when I first moved to Europe, I don’t know why I didn’t just go to the broker I’ve been using for years. And I was just like, “How do I get a mortgage living abroad?” And I contact all these people who are like foreign income experts. And for almost a year, people were like, “No, we can’t get you a mortgage.” And I was just getting rejected and it actually worked out. I ultimately learned how to start investing in syndications and that’s been great.
But then I finally just went back to my mortgage broker and I was like, “What’s the deal with this?” He was like, “Are you on loan right now?” It was like this whole thing I put myself through for absolutely no reason. And then I just went back to the person I’ve used for years, and he had my back. And I think I overcomplicated that. But I think as you said, it’s just like, once I just fell back on the relationships I already had, I solved my problem in a very little roundabout and unnecessarily complex way. But someone I already knew solved my problem.

David:
I think we all do that in one way, shape or form once in our career. And that’s why we at BiggerPockets are trying to help you guys avoid those mistakes by sharing the ones that we made. Do me a favor, everyone. As you’re listening to the show and you notice Mat say something you didn’t know, or maybe Dave or I make a comment that you weren’t aware of, go in the comments and say, “I had no idea it worked like this.” I’d love if we could get people sharing what they learned so everyone else can hear, “Oh, I’m not the only one.” Nobody really understands a lot of these terms.
In fact, I think if you’ve ever heard mortgage backed security or MBS and had no idea what it meant, it just makes you think of the movie, The Big Short, and you didn’t understand it. Mat gives a pretty good definition of how those work and how they affect interest rates, why sometimes rates go down when the prime rate goes up. Just that background in understanding the whole thing, I think brings a lot of clarity to what can be a cloudy and anxiety-induced experience of trying to buy real estate.
So, Dave, any last words before we get you out of here?

Dave:
No, this was super fun as always. And hopefully, we’ll see you again soon.

David:
Thank you very much. This is David Green for Dave the Amsterdam Investor Meyer, signing out.