Physician Home Loan Updates for 2024 with Richard Ricci

Daniel Wrenne: I’m excited. We’re gonna, we’re gonna dig into home buying in the market and talk a lot about what’s going on there.

Rich is a rock star in the world of mortgage loan lending and works with Truist, which was SunTrust Truist Bank. He primarily works with physician loans and knows all there is to know about physician loans, with lots of experience working in that area. So we’re going to dig into all that, and I’m excited to kind of go through all that sort of stuff.

Richard Ricci: And real quick, I gotta make a real quick disclaimer. I work for Truist, but these thoughts and ideas are my own. They’re not, Truist is not.

Daniel Wrenne: This is not advice.

Richard Ricci: Yes, exactly.

Daniel Wrenne: It’s for educational purposes only.

Richard Ricci: Right.

Daniel Wrenne: Consult your advisors and everybody for advice.

Richard Ricci: Yeah. Consult Daniel.

Daniel Wrenne: Yes. If you work with us, if you don’t, then start working with us or find your other advisor. Yes, and we’ll circle back to some scenarios too. Because really it depends on your situation. And the numbers can skew even more in certain situations. So, but yeah, so mortgage rates have gone way up on pretty much everything from like, whether it’s a 30-year, an ARM, or 15 year, pretty much all the products, the rates have gone up a lot. There’s not like a way around that. And the problem with it is it’s like prices have not gone down. Like theoretically, they potentially should because, like you were saying with the buying power in theory, if buying power goes down, prices should theoretically go down on houses, but they haven’t because the inventory is so low. So that’s kind of a weird situation. It’s like you’re paying the same price as before but paying a way higher interest rate. That just crunches you even more. So it’s kind of a weird market. Is there any changes around like the ARM versus 30 year versus 15 year And then the physician mortgage loan space, like what’s changed over the, I know when we talked last, you had to put money down on some of these, like the bank’s got a little squirrely during COVID. And we’re like, ah, we’re not doing 0% anymore.

Richard Ricci: Right, right, right, So right now that’s gone. We’re back to 100 percent financing. And this varies from bank to bank. Just a little bit of color. Conventional loans are Fannie Mae and Freddie Mac loans. So the guidelines, the interest rates, etc., come from Fannie Mae, Freddie Mac. The VA it comes from the VA. FHA comes from the Federal Housing Administration. But these doctor loans are what we call in the industry portfolio loans. So we hold the money on our portfolio. It’s our money and The bank, yes. So we service it, but we also hold the money on a conventional loan. The money goes to Fannie Mae. In the end, even though it’s serviced, you know, by the bank. So because of that, there is more room in guidelines and in price. So the cool thing right now, historically, doctor loans at 100 percent financing used to have a slightly higher interest rate than a conventional loan, right? But when you put them side by side, you’re doing a 5% down conventional loan. You’re doing 100 percent doctor loan. You have to pay PMI. With a conventional loan, you don’t with a doctor loan. So even if the rate was a little bit higher, it still made sense to do. But now since interest rates have gone up, the doctor loans have stayed lower. So my rates for doctor are about a percent lower conventional loans. So I’m like in the low sixes or high fives.

Daniel Wrenne: So it’s like, put less down, lower interest rate

Richard Ricci: yeah, Because people ask me all the time, they’re like, well, what’s the downside? And I’m like, there isn’t one now. You know? There used to be,

Daniel Wrenne: yeah. There used to be like I could point to that, but now there’s nothing like there’s no doubt If you can do 100 percent loan at a percent lower interest rate, like tell me where the downside, you know, but we’ll do like 100 percent financing up to a million and then 5% down to 1.5 and then 10% down to 2 million. And then the other cool thing about the doctor loan is you can close prior to your start date, so you can close up to 90 days prior to the contracted start date and still go off of the income for the future

Daniel Wrenne: So normally you have to provide like pay stubs or Proof of income essentially. And with a typical loan,

Richard Ricci: yes, The typical one year they’re going to want, you’re like, there are some variations to this, but a typical loan you usually have to provide your first pay stub, so you got to start your job

Daniel Wrenne: Yeah, any other big changes that, I didn’t realize that about the rates being have swung the other

Richard Ricci: yeah, I mean, that is the biggest one. And I have that conversation with clients every single day because they call me and they’re like, what? Like I was just got a quote for a conventional loan. It was 7% like, yep,

Daniel Wrenne: Are arms, are arms low. Are arms about the same rate as 15.

Richard Ricci: Arms are, you know, they’re lower than fixed rates. the spread isn’t as much as it was in the past.

Daniel Wrenne: Yeah.

Richard Ricci: Just because they don’t want to, you know, but an arm right now really isn’t a terrible decision because most people are probably going to refinance pretty soon anyway. experts are predicting that rates Probably this is for conventional loans go down to like fives by the end of the year at some point. so if that happens and you know, there might be a lot of people that refinance.

Daniel Wrenne: Yeah. arms are fixed for just for those that aren’t clear, like fixed for a certain period of time, and then they become variable interest rates. So a lot of times the interest rate’s a little lower than fixed rate options. But, then, you know, trade off is, it goes variable. So if rates go higher, I mean, at the end of the day, we don’t know for sure what rates, interest rates are going to do in the future.

Richard Ricci: Right. We have no idea.

Daniel Wrenne: We like to act like we do and

Richard Ricci: Yeah. I, mean,

Daniel Wrenne: I’m like,

Richard Ricci: watching the market. I’m watching the market all day every day and I, you know, listen to updates all the time and I still like, nobody knows.

You know, like, everybody’s been predicting that there will be a housing bubble. For the past four years, it’s been like we’re at a bubble. We’re about to hit a bubble.

Daniel Wrenne: Coming.

Richard Ricci: Yeah. Recessions coming. Recession actually might be here right now.

Daniel Wrenne: I mean, it could be happening, but it could not be too, I…

Richard Ricci: Right.

Daniel Wrenne: Probably, you know.

Richard Ricci: Yeah. But as far as the housing bubble is concerned, the way inventory is, which is, you know, the issue you brought up. That, you know, keeps the values from going down. That’s also the thing that’s going to prevent a housing bubble because there’s no chance that we, you know, decline when we have this inventory issue. As those numbers are going to keep there, and they’ve shown that they’ve slowed down, you know, appreciation has, but it is, you know, still increasing. There’s no bubble or drastic drop like everybody’s been predicting.

Daniel Wrenne: Yeah. Can you have two physician loans through Truist?

Richard Ricci: Not through Truist. So through the Truist guideline is you can have one at a time, okay? but there is an exception where if you have over 20%, let’s say you bought one when you’re a resident and then it’s gone up a bunch. If you have 20% equity, then you can get a second one. As an exception, as long as you can qualify and afford both of them. But like crossover between banks, there’s no rule that says you can’t have more than one. And there’s also no rule that says you can’t have multiple over your, you know.

Daniel Wrenne: Mm-Hmm.

Richard Ricci: Lifetime. Like a lot of people think that you can only get one and that’s not true.

Daniel Wrenne: You’re right. Right, right. Yeah. I work with a lot of people that we got many over the years. So we got a question from an anonymous attendee and it’s funny that we just were talking about this, right after we were talking about predicting future rates. They would like to, if we could give our best guesstimate, hand wave about the chances we will get back to the old days of 10 plus percent interest rates.

Richard Ricci: I don’t think so.

Daniel Wrenne: Impossible.

Not impossible. Never impossible. Because it’s happened before.

Yeah. Well, so in case, so this person obviously knows about the old days. A lot of people don’t even know about the old days.

Richard Ricci: Correct. Yeah. Like a lot of the people that call me, their only knowledge about interest rates is since ’08 where it’s been, you know, 4 3 2%. Right? Everyone’s like 6%. That’s awful. Like, the majority of my career was, you know, like in the, was at 6 something percent. You know, like, it’s not like…

Daniel Wrenne: Probably when you started it was six to seven percent, right?

Richard Ricci: Yeah, for sure. Yeah. So, I mean, it’s not like right now we are not in an abnormal, you know, time. It’s just we have to figure out that it’s the new normal.

Daniel Wrenne: I wonder what would have to happen for it to get into the 10 percent range. I think if inflation, if the inflation numbers keep staying steady at the rate or maybe even going a little higher, for whatever reason, and the Fed keeps raising their rates that could drive rates…

Richard Ricci: Yeah. Yeah. I mean, if…

Daniel Wrenne: That’s the scenario, I…

Richard Ricci: Yeah, if we… if inflation doesn’t get… inflation is the thing, like inflation is the key to all of it. So if what the Fed has been doing curbs inflation, it’s not going to go to 10%. And also if we hit another recession, then rates are, they’re going to have to pump money in the…

Daniel Wrenne: It’ll go down, way…

Richard Ricci: And we’ll have lower rates. I don’t think it’s likely, but who knows, you know…

Daniel Wrenne: Hmm. Yeah. Those are the two outcomes I think is like, they over correction they would, you know, the government intervention is driving a lot of this. So it’s like either they over correct in terms of raising the rate too high, too fast, which puts us in a recession, which probably ends up in really low interest rates in the next few years. On the other hand, if they… The opposite happens. Like they don’t act, they don’t realize how bad inflation really is, and it’s not changing it or it’s continuing. And then they have to keep raising it. And then that’s the scenario where the 10% plus rates happen. And I mean, I think those are both possibilities. I think they’re…

Richard Ricci: I think we’re much closer to the Fed pushing us into a recession.

Daniel Wrenne: I would agree.

But it’s hard to say I’ve made so many predictions that have been wrong over the years, so I’m not a great fortune teller, so anyway…

Okay. Well so let’s get into the home purchasing decision. So, I’d love to talk a little bit about like the buy versus rent situation. We can talk about the, how much you can afford scenario as well. Cause that’s, both of these I think have changed quite a bit over time. Um, so buy versus rent I think that. Renting kind of gets a bad rap and it’s underappreciated. And I think in certain circumstances, maybe we could paint the picture of like a scenario where we would both agree that it’s like a, I mean like the classic rent scenarios, like you have no idea what your future looks like. Lots of uncertainty. New area, like finances are unsure about things.

Richard Ricci: Yeah.

Daniel Wrenne: You don’t know what, maybe you’re new into practice in a new area of the country Um, and you don’t have your, especially if maybe you’re single and you don’t have a family.

Richard Ricci: Right. Right.

Daniel Wrenne: And you’ve never lived in the city before and and you don’t have money for a down payment. So there’s all this like, risk potential if you were to buy and cause with, so renting is nice in the way that is very, very flexible, like low commitment, low maintenance, like you don’t have to… I mean maybe you have to plunge a toilet, but like, you don’t have to, you don’t have to like fix the broken stuff.

Richard Ricci: Those were the days, man.

Daniel Wrenne: I mean, there’s a lot of appeal to renting.

Richard Ricci: So, listen, I’m like, in my job, I’m supposed to say that renting is evil. You know, renting is the worst thing you

So, it’s like a lot of times, the missing exercise people fail to do when they don’t have a financial plan. Is often they don’t think through it like that. They get emotionally tied up in the decision of the house and they forget those really important other priorities and they don’t like carve that money out. That’s why they say save first, spend the rest.

It’s like you gotta like carve out the long term savings. You got to carve out the money to travel. you got to carve out all that like important stuff first and then see what’s like left over after like eating and lifestyle and that kind of thing. And that’s how you back into the house number. That’s like the ideal way to do it is you kind of back into the house.

Richard Ricci: Yes Daniel Wrenne: Unless there’s, I mean, I’m sure there’s some people may be listening. They’re like, actually, the house is absolute most important to me. Like, and that’s all I care

Richard Ricci: Yeah. If that’s the case, then that’s a different, you know, story. For sure.

Daniel Wrenne: in that case, it’s like, no, rich, like, show me the max. Richard Ricci: I mean, it, everybody has different priorities, but what you said was knowing your financial plan, like that’s the whole thing. because that, that way you can set your priorities and figure out what is most important. But if you don’t know your numbers, if you don’t know, like, I mean, you need to know what everything is going to cost.

Utilities, you know, internet cable, like you need to know what that groceries, you need to know what those, that whole package is going to be like. And I will say this, like any of the people that come to me from you, they always. Have a plan

Daniel Wrenne: Yeah. Richard Ricci: lot of times They were like, Hey, I want my, I want Daniel or my financial planner to look at my stuff. You know, I want them to give me, you know, their opinion. And to me, like some mortgage guys don’t like it when there’s a financial plan or dictating things, but I love it, man. Like, because They’re coming into it knowing, you know, what they should know and with somebody who has their best interests at heart.

Daniel Wrenne: Yeah. So if you work with us and we don’t, and you don’t feel confident in those numbers, just let us know and we can help you crunch those numbers, especially if you’re approaching a decision around this. and if you’re a DIYer and you don’t have a plan this is just like a reminder or incentive, I guess. Like you want to For sure. Do that before you, I guess really the time to do it is to have it, have a plan before you set your budget, because. You know, that’s the hard question. It’s like, how much are you going to spend? And you definitely don’t want to start looking. The temptation is to look at houses before you have a budget.

Richard Ricci: No. Yeah, that’s a problem. And I get, I, get, that all the time where people fall in love with the house and then I’ve already made an offer and it was accepted. You know, and then I get, then I get the application. I’m like, you don’t qualify for that. Like,

Daniel Wrenne: uh, and you always will. I mean, if you look at a million dollar house versus $2 million, I mean, the nicer, the more expensive the house, it’s nicer. like you’re going to like

Richard Ricci: Yes. You’re going to want that house. Daniel Wrenne: Yeah. It’s not, It’s not. But you know, just having that plan to, it kind of keeps your head level when you’re getting into that emotional, decision making. So, other than that, like, having a plan is important, but let’s say you got the budget and you’re getting into the decision making phase,

Daniel Wrenne: What I know credit’s important in terms of like getting the best deal. What is the idea what credit score do you have to have to get like the best terms and everything?

Richard Ricci: So usually, and this will vary from bank to bank too, but usually 740 is the magic number. Like we’ll get the best interest rate if you have over 740 There are different tiers in our program. Like if you have, you need a 720 to be able to do 100 percent financing. If you’re between 700 and 699 you got to do 5% percent down. If you’re between 680 and 699 You’re 10% percent down.

Daniel Wrenne: the right go up? Richard Ricci: Yeah. Yeah, the rate goes up, but there’s also, it’s kind of offset because. There’s a difference in the rate if you put money down. So a hundred percent financing, like for instance today it was like 6% 5% percent down is a 10th off of that, and then 10% percent down as a 10th off of that.

Daniel Wrenne: Yeah. We got a question. I think who a I apologize if I’m mispronouncing your name says no extra cookie for credit above 800.

Richard Ricci: No Daniel Wrenne: Congrats on credit above 800 Richard Ricci: I mean, that’s amazing. Yeah, That’s amazing. The other thing would like to point out about credit is people don’t realize a lot of times that what you see at home is not what we see. So when you’re pulling your credit, you, Credit Karma or any of those credit bureaus. You have a, you know, a credit monitoring plan with your bank. Those numbers are going to be lower than what I see. And the reason for that is every, there are so many different scoring models. So what you’re looking at at home is like the credit card model. But there’s also a car loan model mortgage model and you know, unsecured loan model. So they all have different ways they look at scores and you can’t really find the mortgage model at home. So the majority of the scores that people see at home are, vastly different than what I see. One like tip that I’ll share is my FICO. com has. If you google my FICO dot com mortgage scoring model, you can find, a way to, to get those scores that the bank will see. The mortgage bank. Just a word of warning. I think they make you sign up for like a 30 day, you know, 30 day free, plan. And they’ll charge you if you don’t cancel it. So make sure to cancel it,

Daniel Wrenne: Put it on your calendar. Richard Ricci: Yeah. But a lot of times I’ll pull somebody’s credit and they’ll be like, oh my God, this is way, way lower than what I saw. And then I’ll explain it to them and tell them what they need to do to get their scores up and have them go look at their mortgage scores on my Fico before they come back to me so that I’m not, you know, repulling credit too much.

Daniel Wrenne: How often do you see physicians with below the 740? I guess that’s the

Richard Ricci: I mean, a lot. it’s probably less than the rest of the population in my opinion. Like, I don’t know. But I, especially residents, or younger doctors who don’t, have an established a lot of credit yet. That’s the thing that I see the most is like doctors coming right out of medical school, going into residency. They’ll have nothing in their name because mom and dad, you know, paid for everything. And that’s something that’s advice that I would give is just make sure that you have. Three trade lines, three accounts, like credit cards, car loans, unsecured loans,

Daniel Wrenne: some debt. Richard Ricci: We want to see three of those. And I’m not saying like, get some debt charge it all the way up be in the hole. you know, Yeah. Use it for paying gas and pay it off but establish your own credit so that you’re not, because I have a lot of residents that come to me and they have no trade lines. They might have a good credit score, but I need to see that they have three trade lines like that they’ve been paying on for 12 months. If they don’t, I can build non-traditional trade lines through like Cellphone bill or utilities. But a lot of times those are in dad’s or mom’s name too. So if I don’t have any of that, then I got to say, Hey go work on it and come back later. So that’s something that I would recommend is, you know, establishing credit early.

Daniel Wrenne: Yeah, It’s worth. understanding what your credit is. I think, you know, it sounds like the number is sometimes difficult to get, like, and converting it between your score and that score or whatever. But some easy things you can do to increase your credit. Like, I have seen people have trouble with like the debt ratio. Like they say they just have one credit card and they use it for everything. And like the balance on it is like high, but they pay it off every month. But like, it looks like it’s 90 percent utilized or something like that, which hurts their credit score, but it’s like kind of dumb that it does that, but that’s just part of the formula thing. But you can easily like either increase the credit limit or pay it off faster or whatever.

Richard Ricci: Right? So what people don’t realize is that the credit the creditor reports to the credit bureau once a month. So if American Express reports to the credit bureau on the 15th, because that’s when they’re, you know, the payment is due, they usually report on the same day that the payments due. And it’s, your balance is up there. When they report it, you pay it off the next day. Well, it’s not going to show that 30 days. And, you know, it’s going to show that it’s way charged up, like you said. So it’s best to keep those numbers below 30% percent of the limit. That’s kind of the rule of thumb.

Daniel Wrenne: when’s the best time for people to be reaching out to like lenders,

Richard Ricci: like during the month Daniel Wrenne: in relation to the time that they’re going to buy? like 30 days before they buy 60 days before they buy, or,

Richard Ricci: before they buy. So a preapproval, a preapproval is good for like 120 days. So like your credit report is only good for 120 days. But what I tell people is this, come to me before you start looking, before you start falling

Daniel Wrenne: Before you make an offer. For sure. Richard Ricci: Before, yeah. So you know, it only takes us a couple days to do a preapproval, but if you fall in love with the house and you need it yesterday, and then, you know, we gotta put you to the top of the list and then, you know, maybe it’s not an easy preapproval, and then it just turns into a, you know, fire drill. But yeah, I mean, really whenever. you’re About to start looking in earnest, you know, that’s when I get preapproved, You know, just get preapproved and then, then, then you’re off to the races.

Daniel Wrenne: So get your, have a financial plan. Then talk to the lender, talk to Rich. How often do people like how often are people shopping rates? Like, do you get that a lot with physicians Are they normally just like, you’re my guy?

Richard Ricci: a little of both. You know, I have, I get a lot of referral business from, you know, realtors and I’m a preferred lender for a couple of builders. Like, usually when I get something from them, they’re not shopping me, you know, but I get a lot of business from other sources where they’re getting tons and tons of quotes, you know? or, Or they, you know, they read that they needed to get three quotes and that’s what they’re going to do, and there’s nothing wrong with that. One thing I would recommend, When you’re shopping, you know, for a mortgage is that you find out two things. You find out what their interest rate is, of course. Like that’s the first thing. Everyone knows that. But the second is what their lender fees are. Because that can change Immensely, If somebody has way higher fees and that’s why they have a lower rate. Like that’s not comparing apples

Daniel Wrenne: right. Richard Ricci: so lender fees are the part of the closing cost that goes directly to the bank. One of those is the origination fee. So you may have heard the term points, that’s like 1 point is 1% percent origination fee. And you really want to know that, because that can add up quick, especially on your $2 million loan. so you want to know if they charge points. Typically in my quotes, I’m not charging any points. The only time I charge points or is if somebody wants to buy down the rate to get a lower rate. And then the other lender fees are like what the bank charges on every loan. Like we have a processing fee is what we call it. Appraisal fee. Credit report fee.

Daniel Wrenne: Yeah. There’s a bunch of them. Richard Ricci: Tax service fee. So those are the ones you want to know. Daniel Wrenne: break it down. Richard Ricci: Yeah. so those are the ones you want to know. it too. Like a lot of, we see it with a lot of people. They, the classic is they’re like talking to three, they heard that you ought to talk to three lenders and they go to one and they’re like, Hey bob, give me some pricing. And they’re like, 6 percent interest rate and then that’s all that the email says or whatever the communication, And then the other one’s like. 6 percent and 1, 000 closing in the email. And then the third one sends the full cost breakdown, which is more in line with what you’re talking about. And then they, they send it to us and they’re like, maybe the full cost breakdown is like six and a half percent, which is higher than the other two. And they’re like, well, I think I should go with the 6% percent interest rate because it’s a lower rate. But the problem is like, we have no idea what the first two, like you have to have the full breakdown to know what you’re even looking at. And I would not even go further with someone until I saw that full breakdown just took, I mean, that’s good. Even if you’re going to use one lender, it’s just good practice to like look at the full

Richard Ricci: Yeah. You, I mean, you should know what your costs are. But also with the full breakdown, you need to discern. what the lender fees are from the rest of it, Because the city and state taxes, the escrows, The title fees, those are going to wind up being exactly the same no matter who you go with. Daniel Wrenne: well, they should be. Richard Ricci: they will be, but what what the person estimates up front may not be. Right. So I run into this a lot because I over disclose. I want, you know, I want the person to go to closing and pay less than what they thought, what they were So when I put all the fees on there the way they’re supposed to be, and then the other guy doesn’t, you know, like, he like really blow balls all or forgets to put a title fee on there or something. Even though my, you know, let my lender costs are lower, his overall costs look lower. but they’re not, because in the end those fees are going to be exactly the same no matter what. The only fees that are going to change are going to be the lender fees.

Daniel Wrenne: yeah, That’s confusing. To look at. We’ve looked at them a lot, but, this is all good stuff. I think we could go on and on. I know we’re getting close to time, so I wanted to kind of start to wrap up and and talk about some follow up actions to think about. First of all, I’ve already thrown it out there, like our team is always happy to help with financial planning. Um, the financial planning, aspect, which I think is important, in establishing that plan. You know, especially if you work with us. For sure, keep us in the loop. if you’re not working with us, we’re happy to do like a 30-minute call to talk about like pressing questions. or look at like a loan breakdown for you if you want. Like, we can do stuff like that in that 30-minute intro call, which is no cost. So make sure and, and, and look into that. or if you’re doing it yourself, like, you know, have that plan in place. And then Rich is a great resource. what’s awesome about Rich is he’s already said this himself, but I’ll say it too to reinforce that. like he’s very Objective even. I mean, of course he has incentive to recommend certain things to you, but like, he’s a pretty objective guy. Like he’s gonna tell you if he thinks that you should, you know, be renting or if you’re spending too much or whatnot. So he’s a great resource to reach out to. Rich, can you throw out some, like, ways for people to get in touch with you and a little bit more about how to find you?

Richard Ricci: Yeah, Richard dot Richie R I C C I. At truest. com. Yes. My name is Rich Ritchie. I’ve heard Richie Rich maybe once or twice in my lifetime. And then you’re going to put my contact info in the description, I assume. That’s my email address. My website is www. truist. com forward slash Richard dot Richie. So there’s kind of how you can, you know, get in touch with me

Daniel Wrenne: Awesome. Well, it’s been fun. And I’m going to put, I’ll throw in a link to this mortgage all in calculator that we have. That’s really helpful to kind of look at cost breakdowns as well. Any other resources or suggestions you can think of, rich, that we didn’t hit on?

Richard Ricci: Yeah, no. I mean, talk to a professional this is my opinion.

Daniel Wrenne: And talk early and rich is not aggressive either. Like he’s not, that’s partly why we, I mean, I like Rich as a, friend, but, um, You know, I professionally appreciate his non-aggressive approach. Like he’s not, he’s not, this is not bragging, but I do enough business where I don’t, I don’t need to scratch and claw for it, you know? And I don’t need to, to coerce people into doing business with me. You know, It’s a luxury to have

Daniel Wrenne: It’s a good spot to be in.

Richard Ricci: Yeah,

Daniel Wrenne: Well, it’s been fun, rich. I appreciate you coming on and, keep up the good work.

Richard Ricci: You too, my friend.