Good People, Cool Things
Good People, Cool Things

Episode 136 · 3 months ago

136: How to Get a Better Mortgage as an Artist with Alejandro Szita

ABOUT THIS EPISODE

Many artists, musicians, and other creative entrepreneurs want to own property. But because of the unique nature of their industries, they may not be paid as regularly as someone who has a 9-to-5. For example, an artist might get three lump sumps throughout the year instead of a steady paycheck. As a result, many artists and creatives struggle to get approved for a mortgage.

Alejandro Szita has worked all over the lending and real estate industries and has learned the ins and outs. Just as importantly, he understands the mindset behind banks that deal with these types of individuals. Alejandro works with artists and entrepreneurs to ensure they’re maximizing the likelihood of getting a mortgage — and how they can use it to earn even more money.

A few years back, I bought my very first house, and the entire process was all kinds of new to me. I mean, prior to that, I had only done rental properties. So you kind of just talk with the property manager, they spout some garbage, and then you you get your apartment, you can move in house. There's a lot more. You obviously got to go inspect and stuff and and walk through and have all kinds of people look at it. But then there's all sorts of things like your mortgage points, some of the like property mortgage insurance and random things like that that all largely end up with you spending more money than you initially thought you would. There's a closing costs you want to try and get to a certain percentage so you're not paying your mortgage for sixty five thousand years. All of that good stuff. It's a lot. It's very overwhelming, Particularly for artists and other creatives, that can be tough because of the way you get money. You might just have some sort of seasonal product or something where it's maybe four or five months out of the years when you're getting a lot of your money coming in. You know, if you're a musician, you're getting paid through ask gap or b M I or whatever once per quarter. If you're selling art writing, have your own business where there's peak times of years, it's gonna be tough to get loan sometimes, and sometimes getting a mortgage is more difficult than it needs to be. My guest today saw that opportunity and founded his business around it. He's the president of Prosperity Lending. Alejandra Sita, the mortgage expert for the self employed. He works with artists and other creative professionals, advising them on the different types of mortgage deals available, how they can improve their chances of getting alan getting a mortgage, which helps them achieve their professional and personal goals. He also talks about some of the myths around credit score, why banks seem to misunderstand different parts of it, how you can get great mortgage offers, and so much more. We're chanting through all of that head stuff. I'm jelly held this is good people, cool things,...

...and here's a conversation with Alendrasita. To kick it off. Can you tell us your name and your elevator pitch, but also the type of elevator that we're running on. Yes, my name is Alejandrosita. I am a mortgage broker. I'm also real still broken. I'm licensing in California and in Florida, and I do loans for the self employed and the artists, the people that are usually the hardest to qualify for a loan for a mortgage law. We're in a very unusual elevator because even though there are other brokers and banks that say that they specialize on the self employed, they really do not what they have. They have a program that allows the self employed to qualify in an unusual way, but having the program doesn't mean that you would if you're self employed qualified, because you have to put a lot of work, and you have to put a special type of work. You know, you have to look at the person's whole his job, his income, his lifestyle, and then you have to sort of translate that in terms that the lender would understand and approved. And I see that even though that is possible and there are the tools to do that, very few people do it. Was this something that you like, this particular focus. Was that something that you always wanted to do or did you kind of stumble into it and then realize, hey, this is an underserved market, you know a little bit of both. Since I was seven or six, I started to do it, you know, I started to lend money to my friends. But I never thought this would be a career. Had not thought whatsoever of this becoming anything. Then later in life, you know, I used to be in marketing. I used to do infomercials, and I used to write the scripts of the infomercial I even saw in the Home Shopping Network. And then one of my informercial clients back in the year two thousand early on, invited me to a financial seminar. And I've always been inclined to do that, so just...

...because I wanted to know, because I wanted to do this for a living, I decided to go. And to make a long story short, I ended up in real estate. I ended up in the side and the lending side of real estate, which I did at the time not really thinking that this was a long term term career. I thought it was interesting. And it was only after I pretty much did every single job in the real estate that you can imagine. I was a long officer. I was a listening agent, I was a buyer representation agent. I did commercial I did loans, I did commercial loans up even I did syndications indications when you ask people for money for a realsted project. After I did all of that, I wanted you to know what lending is. What I like. The best lending is where I really can give value to my customers. And that's when I even though I didn't before, even though I've been in lending for many years, that's when I decided, you know what, I'm going to do this because like said, this is an underserved market UM, and I am one of those people, are one of those people that it is hard to quantify because I am self employed, so I would do that, and I enjoy doing and have a lot of fun doing it. I freelance on the side, so I I certainly understand the pains of self employment taxes UM, but have not you know, because I do have a full time job as well. When when I was qualifying for a mortgage, it that was what they were looking at. It wasn't like the self employed side of things. And you had mentioned it's more difficult for people who are self employed who are artists to get qualified. So what are some of those challenges and how have you found ways to overcome them. The main challenge is that our clients speak a different language than the lender. The lender it's looking for the borrower that would make them the most money. And the system that they have envisioned, which is the CREDIB reporting system, which is the way of documenting your income. That system is designed to without anyone that they're not sure it's going to make...

...them the most money. Which is weird because people think that all the credit report children am a good person, that are moral in my death, that are responsible, and nothing could be further from the truth. Credit report what it shows, what the score shows. It shows your ability to manage debt, but not according to what you believe it is a good death management because many people, especially employed people, thinking, well, I paid, how can my credit score is not higher? Because the credit score is not to measure that you pay. Although you always here pay your bills on time and then you have a high credit score. That's not a good advice, or at least it's an incomplete advice because it's not paying. It's paying in a certain way within certain ratios, within certain percentages, and with a certain amount of time. And why it's like that because a bunch of people with money got together and decided that that's the way they thought you should behave when managing. That isn't that interesting. So the first thing, the first disconnect is the disconnect about the credit score between self and self employed and successful people. They use credit as a tool. They work on cash flow. You know, the cash flow goes up, the cashulow goes down. They paid debts now because they're thinking about paying the debt. They paid debts in in a in a in a in a strategic manner. Like give you an example. If you get an inflow, let's say you get ten thousand dollars in a particular way. If you're a self employeed guy, you're gonna go, Okay, what can I do with these ten thousand dollars to get the maximum profit? Maybe I could buy this extra inventory. Maybe I could buy this software. Maybe I could hire another person. And yes, I have to pay the debt. The debt is coming do on Friday, but I'll pay you on Monday, or pay it on Tuesday, because then I can buy the software. Then I can make this extra money and they can pay the debt. Yes, and maybe date and maybe a date too late, but I'll...

...pay the hundred bucks or fifty bucks or whatever it is latey and I pay them and I'm fine. That's the mentality of the entrepreneur. That's the mentality of a self employed. But to the bone holder, which is the guy behind the score, that is the worst that you can do because that shows that you are quote unquote irresponsible because you didn't pay their own time. What this guy wants you to think. You get the ten thousand dollars, and he wants you to think, well, I have a thousand dollars worth of that, I'm going to pay them all now. Then with another two thousand dollars that have left, I'm going to save them in case something happens. An entrepreneur never would think like that, because if he did, would not be an entrepreneur. So there is a disconnect right there. And there then income site did the bone holder, the person behind giving it the loan, wants you to see steady income every month. He wants to see that for two years you've paid up the money and so on. But enter It doesn't think that way. Entrepre there are things in terms of waves of cash, waves of cash flow, so they get a big inflow of cash flow they used to invest, they used to do something about it. And when the cash flow drives out, let's say for a month or two, the entrepreneur just tighten up, tightens up. Maybe he doesn't go to dinner every night. Maybe you know, he's thinking about buying a new car. Maybe he doesn't. He writes the wave about but that to the lender, to the bone holder. Wow, this guy is irresponsible. These guys not paying his bills, these guys not making money, and he is, except that most entrepreneurs, they don't make the same amount of money every year. They make the bulk of their money in a few months. You know, if you're in real estate, you probably make all of your money in two or three months, and then the rest of the year you have to manage it. So they can't compute these things. They can't think this way. You know, they think that you're doing something weird. They are not. They cannot envision it. So so that's why I see that they speak the different language. Now, if you work for a company, if you're a salaried employee,...

...you always give the same amount of money, or you get a light increase over the years. They can think with that. It's easy for them to see how much you make. It's easy for them to see what you're paying. It's easy for them to figure out how much is your residual income. They call this residual income, meaning the amount of money that is left at the end of the month that you can do anything with it. And it's a more simple approach. And since upwards of nine of borrowers fit that profile, they long ago back in the eighties beginning of the nineties decided to concentrate on only those borrowers and then they didn't care about the other ten percent or whatever the percentage is, because it's too much work. You know, Now lenders are making a killing because most of the lending decisions are automated. In fact, if you're a double to employee, a computer is going to decide whether to lend you a money or not. Then the computer generates a print out and when it goes to the underwriter, the underwriter just collects the documents that the code the computer print out says that you need to have so the bank needs to have. So the underwriter looks at the computer, looks at the document, checks the documents where the computer said, and then you alonely done. But when you get when you come to the world of the artists of entrepreneur, or when you go to a program that we use to lend to to that client teble that a specific type of forward. There is no computer. This is all done by human being. Human being has to look at all this and there are a bunch of rules that the underwriter has to follow, and our job is to translate your life and your income and your expenses into a way that they comply with those rules. So you can get the law. What's one of those ways you translate for them? Well, the first thing we do when we get a person coming over is we look at their credit and we work on their credit. Even though we are now credit specially, we don't claim to be one, and we don't charge...

...anyone anything for that. We make sure that the credit is within the range that we need. Because I had these conversations and all the time and speak to people and they said, yes, but half a hundred thous notice in the bank, Yes, but my house is paid off. Simply, no lender will ignore the credit score. I mean, no lender would. Um. I'll give you an example that to me was flabbergasting. Millionaire clients, twelve million dollars in the bank, A forty hey mortgages, No one, no too, not three, no four, forty paid mortgages. Talk about a truck record right, ask him to borrow asking ask him to borrow a little bit of money for a house that he could write a check because the money is already sitting in bank account, and much more than that just to buy a regular home. You could not believe. And he's credit score, even though it was okay, there was not stellar or anything. Then at the same time, I had a young girl applying for a long She only had a couple of credit cards that she barely used, and her score was over a hundred points higher. So that that those two tells you right away that the score does not reflect success, does not reflect responsibility. I'm not talking about about that the young customer, by the way. I'm just saying that the credit score does not reflect what you think it does. So the first thing we do is would work on the on the person's credit because we know they're inflexible. If they say the minimum six eighty and you have six seventy nine, even if you if you bring a card full of gold, let's it they're not. They're they're not even gonna take anyto accounts. But if you have six eighty, even if you have one credit card, then your gold I'm taking six eight is an example, but it doesn't have to be six d in just an exam to to give you a n American example.

So the first thing we do we work on the credit and this is more of of an education step because we need to teach them how these people think. So then they can make a few adjustments to the habits and lifestyle in order to comply with that thinking, so in order that the credit score can reflect the true potential. So that's the first thing we do. Then when we come to the income, this is a conversation that had all the time, but look, it makes so much money in my business makes so much money. How come you know I cannot use the income When it comes to income, lenders have specific rules. You can show them that you make a million dollars, but if that million dollars do not follow their rules, it's as good as zero. I would tell you another example. We're doing a mortgage now for a very successful financial advisor. He's been a financial advisor for twenty four years. He has a bank account that I wish I could have myself, and he has savings that are about ten times that amount. He's been working for the same company for twenty four years. He was working as an employee, and then in March of this year he decided to be attend an in an employee for the same company, doing the same job and even making more money. Can you believe that he does not qualify for absolutely anything? No, I can't, and I will tell you why and the reason why. It's even more perplexing. I mean, it's perplexing to you and me, but to the banker is not perplexing at all. To the banker, you said, it's to a banking the the goal, of course, of course, but it wins perplexing. Why Because when you're an employee, you called qualify. If you now become attendance in nine of the self employee, they want you to be self employed for two years. So he's only been self employed since March, So all of the programs for the self employee doesn't qualified for because he doesn't have two years, and all of the programs available to employees are out of his purview right now because he's not an employee. So we found a program that only a very few people can do...

...because you because the lender or the bank has to receive a designation by the U. S. Treasury Department in order to do this law. This is called Community Loan program. The community loan program is something that was conceived for the unbanked. The end bank is people that theoretically or according to the definition, don't have a bank account, cannot have a bank account because maybe because of the immigration status, but they do have a good credit score, they do have the sizeable down payment. So the Treasury Department, if you're a financial institution, that that that will cater to those people, and that complies with a bunch of requirements that will give us the designation, which is very very very hard to to take. I only knew of one bank in New York that had it, but they lost it. And there is now another bank in Newport Beach in southern California that hasn't and I'm lucky to have found it. They will do the loan to this particular customer, even though he's not a bank, very far from it. He's not an immigrant, he's not a foreign national, he's not a person that is sort of not saving financially because they want you to do a financial literacy course too, so I wouldn't have to tell this customer, who is a twenty four year veteran of Friends of Finances, hey, you know you have to pay twenty five bucks and you need to do his ownline literacy. Of course, that is going to be a hard sell. And he says, what are you joking? And as I said, no, it's the only way we can do is loan. You have to pay the seven five bucks and you have to lose financially ric of course, because this is this is the only loan. And he he doesn't understand. I've been trying to explain it to him. He doesn't understand it because it doesn't make any sense. You see, when you go to a bank to us for a loan, you think that people want you to have money. You think that if you have money, if you are successful truck record, that should be enough. Right. That is only true. That is only true or the very big loans, when when you go commercial and you are buying an apartment building that has five or more units,...

...when you're buying a ten million thing, or when you're buying a twenty two million or more building. Yes, then your net worth has to be at least equal to what you're buying. So you show up and you said, I want to buy this twenty million little building. And then you go to a bank and say, hey, I'm gonna put five million dollars down or ten million dollars down, give me a load for ten million. They're gonna go, okay, show me a net worth. If you have the million, will give you a ten million. That only applies on the big transactions, on the what I call the full commercial transactions five units or more, when you descend or not descend, But when you go into the residential, even the investment residential, or even in what they call the small commercial balance. Small commercial balance is just a fancy word for commercial loans between five hundred thousand and five million, the rules change a little bit. And then your networth, yes it is okay, but they look more at your income. You're leveraging your your leveraging your income for a pain. So, to make a long story short, the language that we speak as an individual, even a successful individual, and the language that the banker speaks, they're completely different. And where I see ourselves as sort of the enzyme. You know that the agent that's puts both together so the transaction can occur. So our job is to educate the borrower into what we need from human why, and then I have to educate the lender. By the way. This conversation happens with lenders two, they go, we cannot do this low because you know in a complied with this rule, with that role, with that role. I have to go, look, it does because if you think about his income and if you take this and this into consideration, it does and po oh, yeah, you're right. If you look at from it that way, it does. And I have to go one by one translating it to them. And I have to go one by one translated translating it to the borrower. And that's how we make it happy. But it's a it's a...

...lot of work. I enjoy it. I'm not complaining. It's a lot of work. I enjoy it. And it's very challenging because every loan is different, for every long I have to really really challenges my intellect to the limit to see how I'm going to put this two together in a manner that both are happy, the lender is happy, and the borrow work is happy and we can do it at the cost that makes sense. Just going to mortgages in general, you know, you'll you'll always hear of people like, oh, I had to take out a second mortgage to fund my business or you know, to do something else. I and in my experience a mortgage has really only just been something I pay every month. But how how can people use their mortgage to build up their savings or to kind of increase the money that they have. That's a very good question, Joseph, and thank you for asking me that question, because the mortgage, in my opinion, is one of the most misunderstood financial struments. Most people view the mortgage as a bill that you just pay and it's a necessary evil. However, for most people my experience, what I've seen is the mortgage is the number one savings too because what happens is this, when you make the mortgage payment between a third to half, and then later on it's more than that of that money that you're paying comes back to you. What do I mean that comes back to you comes back in savings to you. You are reducing your death. But when you reduce your death, the extra between the value of the house, and and the balance of your dad is yours, is yours to keep, so it is forcing you to save. And I had these discussions many many times. People go, oh, well, but if you wanted to say, there are much better ways. You know, a mortgage space zero percent of return, You could put it on the market, you could do this, you could do cryptos blah blah blah blah. And it's true if you did it, If you did it, most people will never do...

...it now because they don't know about it. It's because another and this is another precept that another philosopher said a long time ago. He said, in order to say you have to make the savings a necessary expense. If I come to you at the end of the amount and I said, hey, Joseph, remember we need to put five hundred bucks into this um life insurance plan or into this savings plan or bond plan, you may say, well, yeah, I know, you know, but I can just keep this month. You know I have I have a lot of payments, you know, my daughter, my car, this emergency came up. You know, let's do it next month with a mortgage. You can't the bill comes, you decide not to pay it. Then immediately consequences start to accrue, so you have to So it's forced savings, so at least if you do nothing else but pay it, it's the savings vehicle for America. Is the savings vehicle, not just for America, all over the world. I've seen this in England, I've seen this in Chilean, I've seen this in Mexico. Is the number one savings vehicle that for most people, automatically, without thinking, creates a nest egg and creates substantial settings. And this I'm not talking about appreciation, by the way, I'm assuming your house never changed this in value. You buy a house for a hundred thirty year later, thirty years later, still a hundred is what Now you have a hundred that you didn't have before, and for most people they would never be able to save it. Now, when you factor in a little bit of appreciation, and I say a little bit because it depends on the year, it depends on the on the economy, economy, it could be a lot, it could be a little, but whatever it is, it's going to be something. So in addition to your savings, now you have a certain degree of appreciation that could be a lot of could be a little, but it's there. There is no other vehicle that gives you this, So it's just making the payment,...

...doing nothing else but making the payment. But now let's say that you are a little adventurous now and you go, you know what, I understand this, and now I'm going to throw a little bit of extra money into my mortgage. Because what happens is this. Most of the advertising that you see on the internet, on the TV focuses on the rate, and focusing on the rate is a huge mistake. What you have to focus is on the volume of interest. The volume is the quantity that you would end at pain at the end of the loan. I give you an example, if you get a thirty year long at four doesn't see much, right, especially that four percent will be a good rate. Rates are five and a half. So if I said to you, just I give you four percent, you will be jumping jumping up. However, the mortgage of four percent, roughly you would pay double by the end of three years, Meaning you're borrowing a hundred, you're going to end up paying two hundred. So that means that in addition to the hundred that you're that your board that you're borrowing, you're now paying another hundred. So the volume of interest is you buy a house for five hundred thousand, three years later, you're not paying a million. That's a greater return. And you said, hold on a second, you didn't you say, I'm borrowing a four percent. Yeah, you're borrowing a four percent per year compounded year after year after years. That four percent over thirty years is gonna it's gonna transform or it's going to convert into into you paying double why you're borrowing, and now you see why lending is so profitable. So if you know that, you even when you're paying four percent, and even even though the four percent is not under your control because you sign a piece of paper and that's it. I mean, you're like if if they're not going to change it, what you can do is have control of the extra hundred. If you make extra payments. You don't have to be regular on this, by the way, because you rely on blogs and internets. Make it fifty fifty extra payments amount make a hundred dollars extra months.

This works. That advice works well if you're a dobute to employee, but you're an entrepreneur. One month, you can throw a thousand. Another month, you can throw five thousand. And you may only do this once or twice a year. And that's all you need. Now instead of paying a hundred interest, instead of paying an extra thousand in this mock example that I'm making you pay an extra fifty, now you reduce your interests by fifty, even though your rate of interest continues to be the same. I give another example. Now we're doing a mortgage for a gentleman that you're buying a multimillion dollar home. It's almost like a three million dollar home. When you buy those type of homes, usually the rate is high high means. In the seventh, you know, all those rates that you see announced on TV, you know, five four percent are very specific rates where the gold they called conforming loans and co informing loans are loans that have some kind of government sponsorship. And this is what you see every day. So you see that, you think that this is the norm, but this is not the norm. Those loans that you see on TV and on the internet are very specialized to the w to employees that are buying homes or under a million or things like that. If you are an entrepreneur, and you go to really high value homes, the rules are completely different, the rates are completely different. So this gentleman while the multimillion along home, he's ready on the seventh which is very good by the way, for that, he doesn't care because his cash flow is so strong that within five years he's going to pay it off. So even though the rate is high, it's a volume of interest is going to be very small because it's not gonna wait thirty years to pay. Do you see what I mean? Mhm? Does it makes sense? Yeah? I like that and I I try to do that as well with with our mortgages, to cut down on that by paying extra. And yeah,...

I like the idea of doing it, and it makes sense from a from an entrepreneur side of like doing it when that waves, when those ways of cash come in, to take advantage of that and and cut down on the overall volume. I like it. Yeah. Yeah. And the other thing is that don't get lost I mean not just to you, but but to your listeners. Don't get lost on the theory because there is a book written by a financial advice of that s don't do that. If you're going to do that, don't pay down the mortgage paid it open a life insurance policy and do it on a life insurance policy. And then it's the same answer that I'm going to that I gave you before. Yes, you can do that. Yes, if you open the right type of a life insurance policy. That it has to be a mutual a company, you know, and it has to pay dividends. I mean, there is a lot of ifs behind this. It's not just going to run into a life insurance company and opening account. It has to be a very specific type of insurance. It has to have specific moving parts that are just it. Yes, if you do all that, if you get a professional to help you do on that and you do it, which is many percent of people won't be able to do just that bit, Yes, that advice is correct. But for you and I and for many percent of everyone out there, it's not a practical advice because it requires a lot of knowledge, a lot of guidance, and a lot of these concepts, to be honest, are really about about my head and about most people head. So it's always this, this, this, this, this dicote on me between the theoretical that if you do it, yes, it's better and the practical. And I always because I've been doing this for so long and i've been I've seen, you know what happens when you go on the theoretical route and what happens when you go into the practical route. And without fail, the people that hope for the practical, even though it could be quote unquote less efficient in the end, is the one is the winning st energy. Alright, al Hundre, You're almost off...

...the hook. Care but we always like to wrap up with a top three, and I would love to hear your top three financial books for entrepreneurs. One of my favorite books is Five Thousand Years of Death by David Gregor. I think I'm pronouncing his last name is incorrectly, but if you go to Amazon and type last five thousand years of Death, it's a red book. This person went all the way through the historical record. We found out what people have used for money over the last five thousand years on what the average regularly the breath of interest. But I thought that that was that book was fascinating. Another book that comes to mind because I'm a history of boss. It's a book that was written about the attempts of Spain to invade England there matter your matter. It's also available in Amazon. It tells you how three times England tried, I mean Spain tried to invade England with his huge manues collection of ships, and what happened. And then you see that is the best example of mismanagement of money that you can possibly see. Spain was the wealthiest country for hundreds of years. They have a limited money and you have to read the book to understand what a limited money meant. They managed to spend it all and went into bankruptcy anyhow, having a limited money. So that's that's really a lesson into how to do it wrong. But by the same token, when you read that, you see one not the third one. It's about the richest man that ever lived, Mr Fulger, even compared to today standards, he was and still is the richest man that ever lived. And that's in the six. There is no one yet that that if you compare it, you know, if you if you convert the money at that time the money is today, there's nothing that compares to him yet. So it's a very interesting story of how he it. I like it well.

Alhndra, thank you so much for taking the time to chat if people want to learn more about you, intee what you're doing and maybe work together with you. Where can I find you? Send me an email at info at Prosperity Lending Prosperity like something prosperous Prosperity Lending dot us info at Prosperity Lending the US. Or you can go to our website which is the same the same name w w dot Prosperity Lending dot us love it or al Hunter. Thank you again, this is so much fun. Thank you Joseph. It's a pleasure to me you and thank you for giving me a voice to your audience. Likewise, and we gotta end with a corny joke, as we always do. What do you call a coffee robbery? A mugging Good People, Cool Things that's produced in Austin, Texas. If you're a fan of this episode, go ahead and hit that follow button that helps more people here the show. You can send me a message Joey had Good People, Cool Things dot com. Thank you to all of the guests who have been on Good People, Cool Things and check out all the old episodes via Good People, Cool Things dot com. As always, thank you for listening and have a wonderful day,.

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