Sam Sharp was the kid carrying around drumsticks in middle school. He wore drummer T-shirts just so somebody would inquire, giving him permission to talk about drumming, even if just for a few minutes.
The obsession never died. Sharp, executive vice president of mortgage lending at Rate, was drum-obsessed for life. So, a decade later, when a roommate told him about a telemarketing gig for a mortgage company, it wasn’t the type of gig he was thrilled about.
Sharp advanced his drumming skills by that point and had toured with his funk band, Isabelle Haze. He continued working professionally as a drummer after the band ended, and really living the rock star life, he thought, until a broken hand put him out of work for seven months.
“I can tell you with 100% authority that it’s cheap to live on pancake mix and a loaf of bread, jar of peanut butter,” said Sharp.
During that time, he got the tip for the telemarketing job and reluctantly agreed to try it out. He quickly shed what the sales industry deems “call reluctance” because those calls were now determining whether he’d have dinner.
He said he became the No. 1 producer at that mortgage lender within his first year, became a non-equitable partner shortly after, then eventually made his way to Rate — then Guaranteed Rate — where he's been for 16 years.
Today, Sharp is obsessed with helping borrowers, going from working musician to what he calls “mortgage lender extraordinaire.” By day, he leads a team of 11 at Rate, but in the evenings, he still drums throughout Chicago with the jazz group J. Davis Trio.
This interview has been edited and condensed for clarity.
What do homebuyers commonly misunderstand about mortgage payments?
When you think about a mortgage payment, it’s made up of your principal, interest, taxes, insurance, maybe private mortgage insurance and maybe homeowners association dues. That’s six parts, but the No. 1 thing we’re focused on and will likely stay focused on is the interest.
The reality is, you can look to save money on your taxes. You can appeal your taxes. You would be amazed at how many people don’t file their homeowners’ exemption. If you live in a home, you can get your tax bill reduced.
Insurance is outrageous right now and will be a real problem for people. Shopping for your homeowners’ insurance is important. A lot of people get confused because their insurance provider tells them they have a multiple policy discount and they assume it means cheaper than another source. Shop for when you’re buying and reevaluate your policy as things change. There are very few industries where people are going to tell you that you can save money elsewhere.
What else should buyers understand?
How interest is paid on their loan.
Someone on a 15-year loan who is five years into that loan could come to me and say, “Hey, I closed at 4.5% and 10-year mortgages are now at 2%. I want to refinance.”
The reality is that the amount of interest paid over that first five years — doesn’t matter if they drop the interest rate to 1% — will cost that homeowner more interest over the last 10 years.
Mortgages are front-loaded with interest. In those five years, you’re paying back a lot of interest. That means in the next 10 years, the amount of interest remaining on your amortization schedule is less than taking on a new 10-year loan.
The amortization schedule is a schedule of payments over that mortgage. It says you pay this much in interest versus this much in principle. At the end of the payments, you will have paid back all the principle, and the lender will collect their interest.
And mortgages are simple interest. This means that whenever you put more money toward your balance, you recalculate that schedule. People don’t realize this because when you make additional payments, your monthly payment doesn’t change.
If you make one extra payment a year, you’ll pay that loan off about six and a half years faster. The loan re-amortizes to that shorter timeframe. What happens is you’ve recalculated how much interest you will pay over the life of that loan.
Also, having two borrowers on a loan can lower your private mortgage insurance and debt-to-income ratio, further lowering mortgage insurance costs.
Your thoughts on the saying, “marry the house, date the rate”?
I do not subscribe and never have to that. I have a different saying: “Hope for the best, but plan for the worst.”
Why? Because the same people who told everyone to date the rate and marry the home said that three years ago, and those people are still waiting to try and position their finances. Three years is a long time. And what’s happened in those three years? Some people lost their jobs. Cream cheese is $7. You have to understand the impact of what it costs and understand that as you own your home, the cost of ownership goes up.
You have a 30-year fixed loan, so your interest rate will not change unless you improve it, but your property taxes and your homeowners insurance will, and you have to be comfortable paying for that.
What should buyers do when shopping for a mortgage lender?
Talk to several different lenders, at least a couple. The biggest mistake people make, which I understand, is that the majority of people check with their bank.
When it comes to money, the bank holds their money, they think that’s where they get their money and can trust. But the problem is most banks are not positioned to give them the best deal. Shop around for different opinions.
The No. 1 thing I see when buyers are shopping around is they need to make sure they know their total cost. More people need to understand the relationship of their interest rate to their closing costs.
Sometimes paying higher closing costs for a lower interest rate makes a lot of sense because of the amortization schedule. Ask for a comparison of the rate versus the costs and options on different costs versus different rates, then an explanation of how one might better fit the person’s goals.
What’s happening in the mortgage lending world right now?
It’s really expensive to live right now. Groceries go up, and all of a sudden, “Oh, I have to pay $7 for cream cheese.” But there are people who say, “Well, I just pay $7 for cream cheese right now,” and there are other people who say, “We don’t eat cream cheese anymore.”
Unfortunately, that’s a metaphor for people who are talking about things they need to do in their day-to-day life. People have to make sacrifices. What does that mean? That means people are more confused, cautious, hesitant, and probably anxious about buying a home more than ever.
We’re seeing a lot more people who are, rightfully so, looking at more mortgage lenders now than ever before. It’s more competitive.
People are making their judgment based on price, not value. We’re seeing fewer people focusing on what the future looks like because it’s so expensive now that they’re trying to save what they can.