Ted (00:00.034)

Welcome everyone to our podcast today. Our guest is Todd Nerlinger from Union Savings Bank and our topic today is going to cover all things about mortgages. Welcome to the show Todd. Thanks for having me Ted, I really appreciate it. I’ve been a long time listener of your podcast and I’m excited to be on it today. Todd, you and I have known each other a long time and we’ve had a lot of conversations about

what you do for a living. find the area, particularly today, to talk about mortgage is to be a fascinating topic because of the current market conditions. What are you seeing out here today? Yeah. Thanks for asking. It’s a great question. We’ve got a market that has remained fairly tight from an inventory standpoint.

We’ve got a lot of sellers sitting on very low interest rates that they maybe have refinanced or have purchased during the COVID errors where rates were really at record historic lows. So the inventory is quite constrained. Purchase business is moving still pretty briskly. We had probably a trough in inventory and units sold back in 2023.

2024 we had a really good rebound and 2025 seems like it’s still trending in that positive direction in terms of sales. things are looking good out there, looking positive and upbeat for the mortgages. What about the overall market conditions? Yeah, know overall market conditions, it’s been a really volatile ride.

you there’s a lot of uncertainty that we’re you know that we’re kind of seeing politically with you know whether what tariffs are going to look like how is that going to impact interest rates I’m constantly getting asked by customers and you know just people in the space real estate agents or financial planners hey where do you see interest rates going that is a chief concern

Ted (02:26.568)

and that’s something that yes really hard to put your finger on medium-term short-term you can kind of you know see what’s happening in the bond market interest rates tend to follow the ten-year treasury pretty closely the the longer term trend is it is a little bit easier to to spot as well even if you follow macroeconomics

And I think we’re kind of trending with a decrease in interest rates, but it’s definitely not a linear path. We’ve seen just already in 2025, a lot of up and downs with interest rates so far. So where are we at today with respect to rates? Yeah, I think a good gauge that most people kind of, you know, use as a barometer for rates is like, where is your predominant, like 30 or fixed rate without buying points down?

You know, that today, you’re probably going to be on a conventional loan somewhere in that like middle to high sixes right now. VA and FHA rates tend to be a little bit lower than that because they do have that government backing. But yeah, know, that mid to high sixes right now is kind of where we’ve been and we’ve touched as high as seven recently.

Just two or three months back, you could pay a little, just a real small buy down on points and have a rate in the low sixes to even maybe six flat. So, you see, literally… So, let’s talk a little bit about that. So, you’re talking about a 30-year standard rate mortgage with no points buy down.

What percentage of loans does that consist of? What percentage of people do that? Yeah, that’s a great question. I probably couldn’t give you an exact percent, but I would just tell you anecdotally, I would say the overwhelming majority of people will do a 30-year fixed-rate loan. You’re probably looking at somewhere in the, you know,

Ted (04:48.899)

maybe 80 % either start with that or wind up with it if they have to do some sort of an in-house loan just to get into the property and then transition to a fixed rate. Most people, it’s just really hard to afford in today’s economy to afford a 15-year loan. Sure. But it’s interesting that

most people are going for the fixed rate instead of a variable rate? Yeah, I think you are starting to see a little bit of a comeback with the variable rates. you know, with fixed rates having been down for so long, it really got people, I think, thinking like, fixed rate, that’s safer. And then as we saw like in 2023,

inflation spiked at nine percent and you know interest rates we had fixed rates at you know at one point in the mid-sevenths so you know people were looking closer at variable rates at that time but we we saw something really interesting happen in the market and that was basically like the variable rates typically are tied to banks

they’re just internal deposit base, know, so they’ll base their rates on CD money. So if somebody deposits money into a CD, you know, like a one, three, five-year term, something like that, that’s gonna be something that the bank is gonna try to pull together and then lend out on a matching timeframe. And the interesting thing that we saw was, is that with inflation going up,

an interest rates going up the way that they did that there was a real competitive element in the market where the banks had to pay really high interest rates just to retain deposit money so i think at the peak we were paying you know five and a quarter maybe even higher than that just to maintain deposits so you can’t really get that big of a break on it

Ted (07:09.891)

Variable rate loan because of that dynamic because you have to have a little bit of a spread over what you’re paying out on deposit money so Typical current variable rates are as low as what? Yeah, I mean we I would say you could probably get around a percentage point less You know by maybe looking at something like a five percent or a five year to a seven year arm

We’re not seeing as many people take them though. A lot of people are trending towards that, the security of that 30-year fixed. So when you say ARM, you mean adjustable rate mortgage? Adjustable rate mortgage, Now, earlier you talked about the ability to, quote, buy down a loan interest rate through what you called, I think, points. What does that mean?

Yeah, so the easiest way I think to understand points would be to think of it just as a percent of the loan. So just to use a really round number that’s easy for people to kind of follow along on the mental math. Think about a $100,000 loan and one point would basically be $1,000. So it would be one percentage point of that loan amount.

you know, by paying a point that might get you somewhere in the neighborhood of maybe a decrease in interest rate of, you know, 0.25 to maybe 0.375 in interest rate. At different times though in the market, the pricing becomes very attractive to buy down. So whenever I’m talking to a client about buying a rate down, I’m always trying to look at

Market closely and not just get too hung up on hey, let’s buy it down for you know spend X number of dollars to buy it down and see what we can get I’m more or less looking at where’s the market telling me the sweet spot is so if the sweet spot is I can buy Rate down. Let’s say a quarter percent, and it’s only costing me three eighths of a percent in the buy down So three eighths of a point. That’s a really good value for a customer

Ted (09:38.387)

But there is a situation with buying points where you see diminishing returns or diminishing value. So you’ll have customers come to you and say, you know, I just want to, I don’t care what it costs. I want to pay, you know, whatever I need to to get it as low as possible. You see that a lot, especially in a high rate environment where people are nervous about rates long-term. oftentimes what you’ll see is

you you get a little bit too far down the line, it just becomes cost prohibitive to do it. So when you buy down points, do you have to take money out of your pocket for the buy down? Or are buy downs usually financed within the loan? Yeah, we see a little bit of a mix of both. I would say mainly right now, most transactions, the buyers are paying their own

closing cost. So they’re not necessarily financing the cost or maybe the cost that would be allocated to a buy down into the mortgage. But you do see sometimes transactions happen where the seller will say, okay, we’ll pay X number of dollars towards closing costs and prepayments. And with our costs being fairly low,

on the low end of the spectrum, would be able to take maybe that excess that’s available and use that to buy the rate down and get a rate lower than…

So in those cases, the seller would be paying for it. Easy way to think about it would be, like, let’s say a house is $300,000 sales price, but it might appraise out for a little bit higher than that. Let’s say a $305,000 would be justified maybe with an appraisal or with market conditions and comparables. The buyer might say, how about I give you a $305,000 for it, and you pay.

Ted (11:45.906)

$5,000 towards my closing cost. The seller agrees. They could use part of that $5,000 or all of it to use to buy points to buy that interest rate down. Fascinating. Well, let’s talk about situations where you’re trying to determine whether to lend money to somebody to buy either their first home or the house of their dreams.

Let’s go through some of the factors that are really critical. Let’s talk about things like appraisals and credit scores and amount of down payment and things like that. What are you really looking at, Yeah, yeah, no, that’s a, we’re getting into the weeds. I love that. So, you know, some of the things that we’re looking really closely at are

not just credit scores but credit history so a credit score is only kind of the tip of the iceberg in terms of what the credit you know history is and so we’re looking at typically wanted to see that customer has established trade lines so a trade line would just be you know a credit card would be a trade line a automobile loan would be a trade line

and usually want to see that they’ve got those trade lines with at least a twelve plus month history of making payments on things other than a mortgage you know typically so you want to see you’re also typically looking at wanted to see no late payments or maybe an isolated late payment you know only like in the last twelve months that would be

typically something you look at it’s a on a conventional type well now if the credit was let’s say a little less polished didn’t have quite as many trade lines or maybe you have some you know some mispayments over the years and a little bit of you know credit maybe a little bit spotty but the score was okay in the debt to income ratio was okay you still might have an outlet for a loan

Ted (14:08.179)

under a different program like an FHA loan where the underwriting standards are a little bit more forgiving. Those might allow for a little bit higher of a debt to income ratio, whereas conventional loans, debt to income ratio is going to be, you know, they’re not going to want to see that your total debts are exceeding over 50 percent.

even to go that high, you’d really have to have some, what they would call, underwriting would call compensating factors. So, you go too far down there, let’s zero in on what you mean by debt to income ratio. Explain that. Yeah, so debt to income ratio, we are always looking at things from a gross income standpoint. Okay. So, we want to know what’s your gross income.

All income sources, eligible income sources would be factored in. And then what’s your monthly debts? So when we consider monthly debt, what debt are we including and what is excluded, if any? Yeah. So the debts that would be included would be things like an automobile loan payment or a recreational loan payment.

and unsecured long where you maybe did a consolidation loan and and have an unsecured loan out there it could be student loans it could be credit cards it could be any combination of those as far as things that are excluded we do have some unique rules where if you were let’s say for instance you’re on a a joint debt with another person that person had been paying

for that debt out of their account for the last 12 months or more. That would be a debt that we would be able to, with proper documentation, exclude for that person’s debt to income ratio. Very good. Well, in terms of being able to help people who want to move forward with a purchase of a home,

Ted (16:35.027)

I don’t want to say what are the tricks of the trade, but help me better understand what you’re advising people to do and what you’re capable of doing as a mortgage loan specialist. Yeah, I mean, I still have a big passion after 19 years of doing this for helping first-time home buyers.

I’ve been doing it long enough though now that a lot of the first time home buyers I’m helping by maybe their second or third or sometimes even, you four thousand. But really I think the best place to start is to talk to a mortgage lender upfront, you know, when maybe it’s just an idea that, we’re thinking about upsizing or we’re thinking about downsizing or we’re thinking about moving.

and just get a prequalification done or preapproval with a lender. Talk to them, have them check your credit. You want to make sure that all the numbers are looking good in terms of debt to income ratio. You want to make sure that there’s not any surprises on your credit. A lot of people are not monitoring their credit on a regular basis. So checking your credit well in advance, months in advance of needing

credit is a good idea because it gives you time to either address a mistake or to maybe do a few things like pay a couple things off that might give you a little bit of a bump in your score or put you in a better position to buy. The other thing that sometimes people don’t really factor in, is that we’ve got some very, you know,

unique sometimes guidelines just mortgage professionals as a whole in terms of how we might have to calculate income versus how a person might see their income as being. So for instance, if somebody was receiving 1099 and had not been doing that for two years or greater, that could be challenging.

Ted (18:54.227)

to get a mortgage in today’s climate. it wouldn’t be impossible. There’s things that we could do. But having that conversation with us well in advance of going under contract or getting out and spending your time or a realtor’s time in terms of looking at properties, I think is a really smart idea. That makes a lot of sense to me. Now, if people want to do that, will mortgage loan specialists like yourself

meet with people just by what making a phone call scheduling an appointment how does the process work how do they how do they get a hold of somebody and how do they know who to call yeah well I make myself available really in whichever you know method that the customer would like to meet so

I of course love to meet face to face with clients that are willing to do so. In today’s world, mean, people are busy. And so a lot of times it might be like, let’s, you know, my spouse gets off work at such and such time. Can we hop on an initial call, you know, maybe one evening when we can both be on there, just to have that initial call, you know.

But I will try to make myself available to whatever way that they want. But in terms of like finding, you know, a mortgage professional, mean, I think that can be challenging too. You know, I think just doing some research, I’m big on, you know, on personal reviews. You know, it’s how I do a lot of my own consumption for personal services or even products for that matter.

I think doing a little bit of research to try to find professionals in your area that have high peer reviews by other customers I think is a good start. Asking friends and family, if you know that they purchased recently, you could ask them who did you use or you could always check with your financial institution as just a first stop and then get the ball rolling.

Ted (21:16.679)

A lot of times real estate agents are good sources too for specialists. Now in today’s market, is the mortgage loan specialist, are we seeing a decline in the number of specialists that are in the marketplace or are we seeing it expand?

Yeah, it’s a really interesting field. One of the interesting things about it is just the average age of your typical mortgage loan specialist. So we are seeing a lot of people age out and retire. Getting new people into the industry is something that we are actively working on as a company right now.

to replace those people. the thing about it is, a lot of these services claim to be that you can do all this online and you can enter things in in an app. what we’ve found really is, is for pretty much most spectrum, all spectrums of customers, whether it be like a first time home buyer who’s a

you know and early twenties to somebody’s doing it for the third fourth at the time you know in their fifties is they really want that special you know specialized services are really big transaction with a lot of moving parts and you really need to work with somebody that you feel confident can get you to a disease is just not a lot of room for air in this business when you’re under contract with the seller you need to perform

Boy, that’s for sure. So let’s talk a little bit about product. My understanding is that

Ted (23:14.151)

today that there are some, what I would call, specialty products that help somebody get into, say, the house that they really want. Talk to me a little bit about what are some unique options or alternatives for somebody who, you know, maybe just can’t do that 30-year conventional loan. What kind of things are out there to help people? Yeah, we’ve got

a really nice suite of what I feel like are some really industry leading cutting edge products. Probably the most popular loan product that we have for somebody who’s an existing home buyer who has a good equity position in the property is called a blanket loan mortgage. So a blanket loan mortgage, think of it like this. You’ve got a

House one over here that you already own, you’ve been in it maybe for a while, it’s appreciated in value, the loan balance has decreased over time, and so you’ve got a good equity position on that property. So for this example, let’s say that $100,000 is owed on that property, and we’ll say that it’s worth $200,000, just for simple math. Now, the house that you want to buy,

is a move-up property so we’ll say that house is worth you know three hundred thousand and you don’t necessarily have a lot of liquid cash you have hundred thousand dollars tied up in equity and house number one so with you know having that current mortgage and then the thought of taking on a second mortgage you know with the conventional fixed rate loan could be really difficult for

lot of people just from an income standpoint, know, going back to that debt to income ratio. So the blanket loan kind of fixes a lot of that, you know, basically says like, Hey, you know, if you’ve got house number one with a lot of equity, you could buy house number two potentially with no money down. And the way that would work Ted, as we would take the current loan balance that’s owed on house number one.

Ted (25:42.835)

$100,000 and then we would roll that into the purchase price of the house that you would be buying on house number two. So that would give you a $400,000 mortgage loan and we would have that mortgage blanketed over two properties. hence the name blanket mortgage. So we have two pieces of collateral, one worth $200,000, one worth $300,000.

$500,000 in total value of the properties with a $400,000 loan, we’re still in a safe spot because we’re at a 80 % longer value. And this loan has got some features to it that would make it easier to qualify for other than, let’s say, a traditional conventional fixed rate mortgage. I’d like to tell you a little bit about how some of those features work.

you if you you kind of think the blanket loan through and you kind of think back to you know you and i think met back in i want to say two thousand eight or two thousand nine so we were right in the middle of the financial crisis and you know houses were not moving quickly not anywhere close to as quickly as they’re moving today so you know you take a look at say the worst case scenario is is if you were to buy

that second house prior to selling your you know your current house the worst case scenario is is if you couldn’t sell it you could rent right there’s still a very high demand for rental houses a lot of people can’t qualify for a mortgage so the way that the blanket mortgage works to try to help people qualify for what really amounts in most cases to very short-term loan

is we would take like the market rent on the house that you have and we would discount that slightly by about 25 percent and we would use that income to help offset the anticipated payment that you would have by rolling these two mortgages into one. Because we figure look worst case is if this thing doesn’t sell they’re in a good equity position.

Ted (28:08.199)

they’ve got you know the capacity to turn around and rent that for you know the market rate rent we can back out the taxes and insurance that they’re going to have to pay take that number and kind of use that to help qualify them to purchase on this new one so that’s a very unique way to kind of look at things but it’s a very old school common sense lending way to look at it too and so it helps a lot of people get into a house

non-contingent prior to their other house selling. Wow, I like that. That makes a lot of sense. It’s one of our most popular products. And I didn’t even know it existed. I should have come out and done a lunch and learn on this one to your office. Maybe we can line that up. That’s good to know. Well, what other features or

products do you have available to help people? Yeah, so another one that I think is worth talking about that people are probably a little more familiar with or at least have heard of than a blanket loan would be what we call a bridge loan. Have you heard of a bridge loan? I certainly have. In fact, I’ve had a bridge loan before. You have? Okay. So a bridge loan is another great mechanism to be able to buy a new house.

non-contingent. so bridge loan would be different from a blanket in the sense that with a blanket loan, really trying to lump everything under one umbrella, right? Under one blanket, big blanket mortgage. With a bridge loan, you would typically keep your current interest rate and mortgage in place. And then you might piggyback that current home with a home equity line of credit.

And that home equity line of credit would free up some of that trapped equity that you’ve got locked into the house to be able to use and take that over to house number two to buy and use it as a down payment. So in that situation, you typically are going to end up with typically three different loans. The original mortgage loan that you have, the home equity loan,

Ted (30:32.603)

and then the new loan. Now, as much as I love the blanket loan, there are some advantages to having a bridge loan versus the blanket loan. The bridge loan would be a little bit harder to qualify for because you’re typically having now three mortgages and the new mortgage for the house that you would be buying, you’re typically only going to do a bridge loan

if you’re using that fixed rate option, that’s what you’re after. And so there’s a value in that because you can eliminate the interest rate uncertainty from today to the time that you sell your house and you refinance had you done the blanket loan. So if know interest rates are X today, you can lock in that interest rate.

utilize a bridge loan to have the home equity basically use it transfer it over to the down payment for the new house and then you’ve got your fixed rate in place and then we’ve got a really neat feature Ted that I’m just not aware that a lot of banks other banks have and that is called a recast feature on our mortgages and so what that means is when your house

Number one sells and you net x number of dollars after paying off the original loan plus the equity loan. You take that equity, a lot of people want to roll that equity completely over to the new house. And that can be difficult with lot of lenders to do without going through a full blown refinance to get your payment dropped. We’re a little bit different in that sense. We offer this recast feature for a $100 fee.

will basically re-amortize the payment so that it was as if you put that larger chunk down to start with as a down payment. So that would be where a bridge loan could be really attractive because you could lock into a fixed rate today and you could also with the use, pairing it with that recast, have a mechanism to get to a finished product, a finished loan amount so that it was as if you had sold previously.

Ted (32:57.692)

buying. that would be the advantage of that bridge, but it’s just a little harder for people to qualify for. Is that the main disadvantage? That I would say is the main disadvantage, yes. Sounds like it’s a little more complicated as well. And it is more complicated. You’ve got more moving parts. And I would add one more thing, too. Not only is it harder to qualify for,

but sometimes even when people can qualify for the bridge loan they like the idea of the blanket loan better for a couple different reasons let me explain so the the main reason would be that when you do a blanket mortgage and you’re re resetting that current loan back onto a new thirty year loan you’re basically re-amortizing that balance

back to 30 years. So for instance, if you were in that loan for some time and it started out at a much higher loan balance, then the payment might be based off a much higher loan balance. Or maybe you did a 15-year loan on that loan, but carrying a 15-year loan as you’re making this transition to house number two is a little bit difficult.

So by doing the blanket mortgage, we’re able to re-amortize everything back to a 30-year loan. And a lot of times what we see is that that decreases the overall payment compared with having three separate mortgages together. So oftentimes people, even when they might qualify for the bridge loan, once they understand the differences and that it’s just a little easier on the budget to get from house number one to house number two by using the blanket loan.

we will have a lot of people opt for the blanket loan for that reason. That makes sense. What else have you got in your toolkit? Well, I think this one would be really applicable and I probably need to come out and talk to Ted about it because I know he does the financial planning but we have a very unique product that we call like an asset dissipation loan.

Ted (35:19.453)

And so basically the way that would work, is let’s say a client is maybe in this retirement phase. They have a lot of assets and they’re taking social security or maybe have a small pension. And they’re just in a really good position asset wise where they haven’t needed to start taking, you know, a required minimum distribution.

And they don’t necessarily want to take money out of investments to pay for a house cash because of tax implications, capital gains, and all the rest. So with the asset dissipation loan, we’ll basically take a value assigned at 70 % of the current balance and divide that by 60 months and use that as a asset

or as an income number for them to help prove that they can qualify for mortgage. Now you’ve lost me there. Okay. Yeah, you’re going to have to break this down into some small steps for me. Okay, so let’s break it down. So let’s say we’ve got a customer who they want to downsize. Okay, they want to sell the big family home. They don’t keep a lot of cash, but they do have a lot of money in investment.

Okay, they also don’t… Honestly, we have, I would say the majority of our clients are in that position when they’re ready for retirement. Okay, great. So let’s say that they want to buy another house, but they really, especially when you’re older, sometimes those transitions can be tougher, and you don’t want to necessarily have to go in and stay short term or stay with somebody, so you really want to…

purchase first and then sell. Maybe transitioning all your items that you’ve accumulated over that kind of thing. So with the asset loan, this would be a situation where they’re not necessarily showing a high income because they’re in retirement. And they maybe are taking a social security or a pension, but they couldn’t necessarily qualify to carry two mortgages at a time because the income’s just not there.

Ted (37:48.285)

but the assets are there. As a bank, know that somebody that’s in a good asset position, worst case is, is they could tap into those assets and they could use them to live off of and pay their bills or pay their obligations. So we have an underwriting approach where we would take, let’s say you had a million dollars in retirement assets or it could be brokerage accounts or some combination thereof.

We would take a million dollars and we would say, OK, a million dollars discounted by 30%. That would give us $700,000. And then we would take $700,000. We would divide that over a five-year span. Because we figure a five-year span with that’s plenty enough, we have to be able to safely say that it

a client can make repayment for at least three years. We’re going a little above that, saying five years. So with five years, if you divided $700,000 divided by five years, that would give you $11,000 and about $11,660 per month. So that would be an income that on paper we could use to qualify that customer.

to purchase this house whereas if you were trying to come to a traditional lender and say you know I’d like to do a 30 year fixed mortgage they might look at you know the debt to income ratio because you’ve got this really big house with maybe high taxes and such and maybe no other debt but not a lot of income and say well you just don’t qualify. We take a common sense approach

look at it where if you’ve got a high amount of assets we can use that asset income to help you qualify and that’s been a really safe loan for us very very low default rates you know with people that are carrying high assets like that. Boy that’s a great great strategy I really like that I think that would be applicable to a large number of our clients let me ask you this does it

Ted (40:14.615)

It sounds like it doesn’t depend upon what those assets are. Do they have to be liquid? You’re not going to count real estate, other real estate, or are you? Well, they do have to be able to be drawn on in some capacity. whether that be a brokerage account or a 401k or a traditional or Roth IRA, a TSP,

government type retirement account equivalent, those would be fine. What wouldn’t work would be something that maybe ties in an asset value to a pension type program where you really can’t draw that money out if you needed to. there’s obviously tax implications to potentially getting in and making those draws.

whether it be retirement account or brokerage account with capital gains but the we know as a lender worst case didn’t have enough income coming in or didn’t sell the house you know enough time where you know you ran through your checking savings liquid stuff you could get to those assets we just want to see that they’re one of those vehicles that you really could get to worst case even though you probably wouldn’t need to

But for instance a vacation home is not going to work. Yeah, so a vacation home would really, that would kind of fall more under the blanket loan than it would the asset dissipation loan. So it would have to be more of like a stock or security bond type asset with a liquid component to it.

Is the lender taking any kind of pledge or security interest in the underlying assets? Yes, we would take a mortgage on the real estate, but typically we would not be pledging on any of the assets that we’re using to qualify.

Ted (42:30.073)

Interesting. Well Todd, I could talk to you forever, but I think it’s we’ve kind of run out of time here today. Great insight on what’s going on within the marketplace. I really enjoyed our conversation about some special strategies that can help our clients. Some, you know, some things that I’d never heard of before. So I’ve learned something today. So that’s really helpful. If people want to contact you,

You’re at Union Savings. Where’s your office at and how do they get a hold of you? Yeah, thanks Ted and thanks. Really enjoyed the conversation as well. So the I’m at the Union Savings Bank in Centerville, Ohio at 5651 Park Hills Avenue. That would be Dayton 45429 and

The way to get in touch with me would be either by phone or by email. The phone number, my personal cell would be 937-271-6305. That’d be a great way to send me a call or a text or an email at tnerlinger at usavingsbank.com. That end is just a letter U, savings spelled out with an S on the end.

bank.com and would love to help any of your listeners. Thanks so much Todd for being with us today and I hope to see you around town soon. Sounds good Ted, appreciate having you have me on.

Take care.