Mastering Real Estate Financing: 5 Key Insights from a Mortgage Expert

Dylan Silver (00:01.474)
Hey folks, welcome back to the show. I’m your host, Dylan Silver, and today on the show I have Mike Miklaus, who provides professional mortgage services and advice to home buyers and property owners throughout the state of California. Mike, welcome to the show.

Mike Miklaus (00:19.597)
Hey, thanks Dylan. I’m really glad to be on your show. You have a great following and I appreciate the opportunity to share what we’re doing here in California.

Dylan Silver (00:28.96)
I’m always blessed to talk with new people and real estate entrepreneurs across the country. Today’s no different. I always like to start by asking guests how they got into the real estate space.

Mike Miklaus (00:42.319)
Well, my story is particularly fascinating and it was interesting enough that I was invited to participate in Jack Canfield’s latest book last year called Success Redefined. And so my chapter is defined as a servant leadership fuel. And the truth is I answered an ad this big coming out of UCLA to promote thrift and home ownership and went to work for a savings and loan.

back when we had savings and loans and thrifts. In my adult lifetime, we’ve gone from 110,000 banks and savings and loans to only 4,300 in the country. And so I migrated from banking into mortgage banking and from mortgage banking into mortgage brokerage. So 28 years ago, after going to a men’s Christian conference in Oakland called Promise Keepers, I came home and decided to start Integrity Mortgage.

And now we’re in our 29th year.

Dylan Silver (01:44.142)
Wow, so let’s talk about scaling a business. Of course, the many myriad of changes you’ve seen over that duration of time. As a real estate agent, new agent myself, but also a wholesaler, and as just someone in the real estate space, I’ve seen now, it seems like every five years, people have to adapt. So talk about going in full cycle, which I consider to be 25 years, as someone in the real estate space, and how the business has changed.

Mike Miklaus (02:13.103)
The business has changed immensely. I used to take a loan application on one page and go out and drive the street that the house was on and shoot a Polaroid to attach a picture of what the bank was going to lend on. And we used little things like this called a factor book to manually calculate the payments. So every once in a while when I get an up at a young loan officer, I toss this at him and ask him if he can calculate a payment faster than I can.

The truth of the matter is the computer does it all for us now and the analysis happens with AI now. I mean, we can even upload information into some of our primary wholesale lending partners and get an analysis of the self-employed individuals situation or if it’s a DSCR loan, which as you know is an investment property purchase.

where a borrower wants to use the property only to qualify for the mortgage and not consider other income factors, we can literally upload those into the systems now and get a reasonable range of what we can expect for our clients prior to an appraisal. the industry has changed dramatically.

Dylan Silver (03:26.126)
When did you start to see these DSCR loans coming about?

Mike Miklaus (03:29.615)
What’s that now?

Mike Miklaus (03:34.753)
We started seeing those in the past two to three years, really. And let me explain why. The reason why is because in 2008, in the one real estate collapse in my lifetime, probably the only one you’ll see in your lifetime, we came up with a new way to underwrite that required ability to pay.

And so all qualifying mortgages approved through Fannie Mae, Freddie Mac, and the other agencies and the Jenny Mae FHA loans, they all require an analysis of ability to pay. Prior to that, we had some really horrible, goofy instruments and we had a perfect storm where the birth rate collapsed at the same time the builders were overbuilding and we literally had what we called liar loans.

where you didn’t have to prove your income or anything else. When that collapsed, we went to ability to pay. When ability to pay got its footing and after about 10 years of operating under some more restrictive rules, then the marketplace began to say, well, what about the small investor that would like to buy a ninth unit? Or what about the small investor who has the capital to put down a down payment?

but may not qualify for their income purposes because they’re self-employed and their accountant’s very good at hiding their income for tax purposes. That’s why the DSR loan came into being. And it’s a great tool for someone that wants to buy an investment property but may not qualify based on traditional ratios.

Dylan Silver (05:18.434)
Yeah, I mean, I look at it and I think it’s one of these deals where I think a lot of people are unaware. I mean, I’m in it, so I see a lot of real estate entrepreneurs taking advantage of it. But the general public probably has no idea what that acronym stands for.

Mike Miklaus (05:34.061)
No, the public does not have any idea about that. You’re right.

Dylan Silver (05:38.732)
You know, there’s so many tools that people can use. think about when I, I’m still relatively new in my real estate journey, been doing this two years. When I was on the outside looking in, just trying to be somewhat involved in the real estate space, no one that was in my circle really even thought that it was realistic. Cause it was like, what do you, who do you know about real estate? What are you going to go flip houses? Where’s the money going to come from? This cash for keys thing, that’s not real. You know, what, I don’t understand wholesaling. What is that like wholesaling a car? You know, so.

So people were very much, it makes sense, it’s like a whole other language, but then kind of you peel it back layer by layer. And I’ve always told people, and I’ve said this on earlier podcasts, that the thing that I worried so much about in the beginning was how to do everything. And now that I’m two years in, I worry more about who do I gotta talk to who already knows how to do it? And let me ingratiate myself in their circle and I’ll learn faster that way.

Mike Miklaus (06:36.121)
Well, that makes you very insightful and a quicker learner than me. Because the truth of the matter is sometimes we tend to try and grow by asking, how do I do that? How do I do that? How do I scale? And everything’s impossible till somebody else has done it once. And then we realize it’s very possible. You know, it was impossible to run a four minute mile until it was done. And so.

Dylan Silver (06:41.198)
you

Dylan Silver (07:00.856)
Yep.

Mike Miklaus (07:02.349)
The real question in many cases is not how do I do this next, but to scale, it’s asking who do I need on my team to make this possible for me? And sometimes when you’re working on a project and you don’t find that person, then you go to your network and you say, who do you know that I need to know that has knowledge about this?

have a good network of supportive, talented, knowledgeable people, they’re going to surface the who for you.

Dylan Silver (07:40.94)
No question, you know, I can’t say enough positive things about networking and meeting the right people. In my journey, I call it like guerrilla networking or being a networking junkie. I do think it’s a skill. I think that most people don’t reference it as a skill. They reference it as you’re a people person. I’m shockingly, I have this, I’m a co-host on this podcast. I wouldn’t consider myself a people person by nature. It was something that I realized

for survival purposes, definitely in the real estate space, I just had to be. Because I didn’t have, it was no one in my circle who remotely believed that real estate was a possible career path for, definitely for me, but let alone for maybe themselves even. So I had to really go outside of not just my comfort zone, but my circle and find a whole new way really to make a living.

That process was eye-opening for me.

Mike Miklaus (08:43.609)
Yeah, I described that as seeking travel advice from somebody who’s never been there. You know, I had a young man that I just recently helped with his first purchase. He came to me, he’s in his early 30s. He’s been reluctant to buy because he’s always been told that if you buy, you’re going to be saddled with the house and he wasn’t sure he could make the payments and every excuse and

Dylan Silver (08:48.991)
Yeah.

Mike Miklaus (09:10.671)
In his circle of friends, I asked him how many of his circle of friends were homeowners and it was very few. So I said to him, I said, do you want to be held in the same position as all of them? Or do you want me to explain to you the miracle of compound interest, which is you put 5 % down as an owner occupant and move in. And if you buy a $500,000 property and it appreciates 4 %

you just made 20,000 on your 25,000, how does that compare to the other investing you’re doing in your life? And at that point, the light bulb went off a little bit and he said, well, but maybe I can’t afford the payment of a $500,000 property. And I said, well, then why don’t we explore looking at buying a property with an ADU already on the property? Then you can rent the ADU and that will help cover the payment and you can have

someone on your property do what you’ve been doing for somebody else already, which is you’re already buying a property, you’re just buying it for somebody else, because rent is 100 % interest. So at that point, he looked at it, he said, yeah, this makes a lot of sense. And it made so much sense that he found a property with a little one bedroom ADU and he’s single, he moved in the ADU and rented the big unit and he’s practically

Dylan Silver (10:17.4)
Cute.

Mike Miklaus (10:37.069)
You know, well, his P &I is covered completely. So all he’s paying his taxes and insurance and he’s building the first rung of generational wealth for him and his future family if he ever finds the girl he wants to marry.

Dylan Silver (10:50.136)
He will. He’s doing it the right way. think the ADUs are going to be more and more popular. It’s very interesting. Actually, this podcast is filmed out of an ADU on a ranch in Dallas, North Dallas. And so if you hear any farm animals in the background, they might make an audible appearance. But the ADUs are interesting.

Mike Miklaus (11:03.375)
There you go.

Mike Miklaus (11:11.585)
Well, that’s schedule F. That’s a whole other topic of conversation for qualifying people to buy.

Dylan Silver (11:17.494)
I mean, I’m in Texas, right? So we like to think, at least, and I certainly experienced it, that our exam, the Texas real estate exam, is one of the harder ones because there’s so much that’s very unique about the Texas real estate market. You know, have your mineral rights. You’ve got farm and ranch. You’ve got our own unique laws. Like, Texas was its own country at one point in time that many people may not be aware of.

Mike Miklaus (11:41.167)
I know your junior lien rules are unique in terms of a home equity or a second mortgage type of thing.

Dylan Silver (11:50.434)
Yeah, very unique in so many regards. I don’t want to butcher it because it was one of these deals, Mike, where I studied as much as possible and I was grateful that I passed. then to be honest, every time that I get asked a certain question, I say, let me look it up. Let me look it up because there was so much information.

Mike Miklaus (12:06.509)
Yeah. Well, now knowledge is that knowledge is knowing how to look things up and AI is making it easier than ever. You know, when they asked Albert Einstein his phone number, he reached for the phone book. Okay. So, know, storing stuff in your mind isn’t as important as knowing how to find what you need to know when you need to know it.

Dylan Silver (12:30.764)
Yeah, there’s actually going back to the the ADU topic, there’s actually an interesting real estate play that’s happening out in real time over here. So to my knowledge, and I could be butchering this slightly for people who have like short term rentals on a property that you can’t have multiple different units on a property and have them both. And I could be butchering this slightly, but in Texas at least or in the Dallas area. But they may be doing it or passing some

some legislation where you could actually have multiple units on the same property, which would really change things. Then you have ADUs and you have the house and then you have the ADU and you can do them both. And this may actually be happening already, but I’ve heard some chatter about this and I thought, wow, that would be interesting, right? So if you have your house and then you have a dwelling unit in the back and you’re able to rent out both of them, I mean, that would be phenomenal.

Mike Miklaus (13:25.199)
Well, the battle there is the battle between the social planners who want all the ADUs on existing residential properties that are single family residential areas near other modes of transportation besides cars. You know, they’re really pushing them in California to be along bus line, train line, commuter lines. And they’ve tried for ever since

What was it? Jessica Rabbit or whatever in the 1930s to keep people in public transportation in LA and they’ve never succeeded. So the truth of the matter is we love our independence. that comes back to, we touched on it, but I had a topic in the back of my head that I wanted to mention because your show appeals.

Dylan Silver (14:02.382)
you

Dylan Silver (14:08.238)
we do.

Mike Miklaus (14:18.041)
to investors and the parent show talks about the investment in real estate community. And we literally have seven different ways today to qualify a self-employed person. So it’s important to know that if the tax returns don’t work, there are other vehicles. It could be bank statements. It could be a CPA letter. There are a variety of tools available, seven of them, that we can use with a self-employed individual to help them purchase.

property if at first blush their tax returns don’t support the decision to lend them.

Dylan Silver (14:54.606)
There’s two areas, Mike, that I’d like to dive into here. The self-employed is one, without giving away all the gold. Don’t give away all the sauce, Mike. Let’s say some of it. The other one.

Mike Miklaus (15:03.779)
No, The truth is it’s much easier for me to do it than to explain it.

Dylan Silver (15:09.998)
The other one is recent college graduates who would maybe like to qualify for a home and realistically can they. And I’ve heard some interesting things, like people using job letters and a diploma to qualify. I don’t know the validity of this because I don’t have any deeds in my name yet. I’d like to. So let’s dive into those topics and I’d love to get your feedback there.

Mike Miklaus (15:34.671)
Well, let’s take them in reverse order. Let’s first talk about that college graduate, because we’re in graduation month right now, and people are graduating and they’ve got the diploma, okay, but they don’t have a job. Well, really all we need, we don’t need the two-year income history if they’ve been full-time in school. We need the diploma, and we need to have them have an offer letter from an employer in the field that they intend to work on.

So if they have an engineering degree, I don’t want a letter saying that they’re going to be the bouncer at the local club, right? We need a civil engineering or whatever type of engineering they specialize in. We need that type of employer to say, we intend to hire Dylan Silver to start August 1st at a base salary of $90,000 a year or whatever it happens to be. And then based off of the letter combined with the diploma,

we can get an approval in place and it will be a subject to approval subject to you receiving the first pay stub.

Dylan Silver (16:41.208)
Hmm.

Mike Miklaus (16:42.095)
Okay, so that’s how that works. Now with respect to the self-employed and that whole topic, really it’s a matter of, you know, the old conversation about communication requires a conversation. In other words, you have to listen as well as hear.

And you have to have in my industry, which a lot of loan officers don’t have, which is why I’ve been so successful all these years. If I could throw in a shameless plug, the National Association of Mortgage Brokers nominated me as mortgage broker of the year in 2022 and 2023 for brokers with less than 25 employees. So they’re either telling me that I’ve gotten the hang of it or that, hey, Mike, it’s about time for you to retire, you know.

Dylan Silver (17:24.152)
Let’s go. Let’s go.

Dylan Silver (17:34.062)
Ha ha ha!

Mike Miklaus (17:35.241)
But I have no intention of retiring because I love doing what I do. I love solving problems for clients. That requires an attitude of curiosity. That requires asking the second question, even when it’s uncomfortable. OK, we’re showing farming losses on this property. Why are we showing that? Well, I’ve got this Amand orchard and the water rights have changed to where the water expense doesn’t quite cover the lease of the almonds anymore.

Dylan Silver (17:44.067)
Yep.

Mike Miklaus (18:05.153)
Okay, well, that’s a material fact. How do we work around that? What’s the prospect of when that lease comes up? What’s the prospect of getting it rewritten with the water reclamation district? What’s the prospect of? You have to ask the next difficult question to sort out how to structure the deal so that what’s desired is accomplished, which is that the person buys that property that they’re looking at.

Dylan Silver (18:33.474)
Yeah.

Mike Miklaus (18:34.615)
It can only be done if you’re willing, you know, to get it. You know, it’s just like if I was, if I was in meat manufacturing, nobody wants to see the sausage made. You really need to be able to, you know, muscle the, the facts a little bit and, need them and, and work them up to where you can, you can bake up the explanation of why the transaction makes sense.

Because at the end of the day, AI doesn’t make the decision. People make the decisions. And the person that’s going to sign their name to that loan has to trust me that I properly vetted the situation. And that requires the client trusting me to give me the information I need to put them in the best possible light. Because, you know, let’s let’s face it. You can send five photographers out to shoot the same property.

And you’ll know after looking at the photographs which one presented the property well.

Dylan Silver (19:36.334)
100 % absolutely.

Mike Miklaus (19:37.743)
Same with your financials. You can talk to five loan officers and get five different pictures of yourself. And a couple of them will look like the initial AI animated pictures and you won’t like them at all.

Dylan Silver (19:51.48)
You know, I think, the loan officers, loan originators, this space is so critical. Everyone, when you’re going home shopping, right, you’re looking at the homes, maybe you’re on Zillow, you’re looking for agents, and then maybe the agent connects you with a loan officer. And I think a lot of young people specifically have had a, I can speak for myself and other people who I’ve talked to, have almost had some bad taste because you get maybe somebody who doesn’t give you lots of options or perspective or says,

Mike Miklaus (20:03.854)
Right.

Mike Miklaus (20:17.145)
Sure.

Dylan Silver (20:21.464)
well you need it you know fifty thousand dollars down and a cosigner so and you like what I make you know eighty grand a year selling cars what what’s what’s the the issue here is the is it the credit will the credits good enough but you just don’t have a lot of history with large loans

And I think a lot of people, I can speak for young people, feel like, this is discouraging and kind of give up. But now that I’m on the other side of this, now like five, six years later after going through this process the first time, I realize, you know, the loan officers, these people are really who drive the whole deal. Because the real estate, the listing agent isn’t going to take it too seriously or offer if you don’t have the approval letter. And you’re not going to be able to get anything anyhow without that.

Mike Miklaus (21:05.231)
So one of the things that I do that’s totally different, and in fact, I just got from another mortgage company and I won’t hold this up because it’s on their letterhead, but this person was pre-approved for a 96.5 % conventional loan. Obviously it’s FHA, it’s 3.5 % down, but that’s not what the letter says. And the expiration date of the approval is May 16 of 2026. They’ve approved them for an entire year.

Now mind you, the credit scores can change. Mind you, they don’t know the taxes or insurance of the property the person’s writing on. So that letter would be better served down in the little room downstairs where the flushing mechanism is than it would be in use for a loan. My letters are totally different. My first step with a client is I would say, Dylan, what…

Dylan Silver (21:54.616)
Yeah.

Mike Miklaus (22:01.945)
How much property do you think you want to try and buy? Now, next question. What price range or what payment range would you feel comfortable writing a check every month? Let’s compare it what your rent is now. And let’s talk about how the principal portion of every payment is an investment where you take money out of your left pocket and put it into your right. Let’s have that conversation. Now that we’ve dialed in, based on your income, you can buy a house up here.

But based on your comfort zone, you’re telling me you want a payment down here and we need to reconcile those. So what I’m going to do is I’m going to prepare a total cost analysis and give you what you’re capable of and what you’re willing to do so that you have them side by side and can evaluate where you want to be as you’re out looking on Zillow or in my particular case, I encourage people to look at realtor.com.

You know, I still think the A in Zillow stands for accuracy. I just can’t break my feeling about that. So I know that’s the preferred platform of the millennial, you know, realtor.com has a lot more detailed information on the property, its history and so forth. That’s very valuable to people. it’s becoming now the second largest search engine for real estate. So, and it’s tied directly to most Metro lists. So.

Dylan Silver (23:22.392)
Good to know. This is good to know.

Mike Miklaus (23:26.339)
That’s the one I encourage people to use. But that said, I prepare my total cost analysis so that I’m your true mortgage advisor and I’m giving you choices and then you’re telling me where you want to be. Then when you go out with your agent and write, in this case, you’re taking your client out to write on a property, I’m available so that if they find a property that’s on

Dylan Silver (23:28.952)
Well, if that number won’t

Mike Miklaus (23:55.627)
Lariat Street in downtown Dallas and it’s the house of their dreams and it’s listed at, you know, pick a figure. So let’s just say for this argument 600,000 and you want to go in there and offer 580. We’re to have the conversation. Does Dylan, would it be better for your clients to write the offer at 580 or based on the profile I have, they may need help with closing costs. Why don’t we write it at 600 with a $20,000 credit from the seller and then let’s use the seller’s money.

to get them in the house by paying their closing costs. And if there’s any additional money, I may be able to buy down the interest rate and get them a lower payment than what I qualified them at. So let’s try that strategy first, if that’s agreeable to you. So the realtor and I have the conversation to work together to work on behalf of the client. Then my letter is property specific. It’s addressed today. It says that we’re making an offer on Lariat Street. It’s for 600,000. It’s addressed to the listing agent.

And then you tell me when you presented the offer to the listing agent, and then I pick up my cell phone and say, hey, Linda Lister, I just wanted you to know that I have a really great, completely approved client. I’ve vetted their income, their assets and their credit, and we’re prepared to close in 21 days or less. So please give our offer serious consideration because this young person really deserves their first proper.

Dylan Silver (25:23.126)
Wow. If I’m the seller and I get an offer like that, I say, well, we got to put this one to the front of the line.

Mike Miklaus (25:24.407)
That’s how we work.

Mike Miklaus (25:32.215)
Right. and by the way, the proof of funds is attached to my letter as well. I always provide properly vetted proof of funds so that the listing agent doesn’t have to ask for it.

Dylan Silver (25:46.208)
are most are most people who are who are providing mortgage services that i would say doing that much outreach to the the agents

Mike Miklaus (25:57.559)
No, no, that’s why I’ve been very blessed to be in the top 1 % of the industry. And I’ve averaged a very nice mid six to low seven figure income for the last 28 years, depending on the year.

Dylan Silver (26:14.102)
It’s amazing that one touch. mean, I’m thinking about this as a new agent, right? And I’m thinking about the offers that I make. I want to work with lot with investors. And a lot of the things that we recognize is, well, if we’re looking for fix and flip properties, we might not have the highest offer, right? But if we can show proof of funds, if we can show a small option period, if we’re saying we’re going to close in two to three weeks, we’re getting serious consideration to these offers, even if we might not have the highest offer, because it’s compelling.

Mike Miklaus (26:43.404)
Exactly.

Dylan Silver (26:44.016)
It’s someone else who is shopping, really.

Mike Miklaus (26:47.789)
Yeah. See, I’m in the business of helping facilitate a purchase. I’m not in the business of helping facilitate writing offers. So how do we best, how do we best structure the transaction to where the listing agent and the seller wants to take your transaction? And if the client needs financing, I need to position my financing.

Dylan Silver (27:10.274)
Yep.

Mike Miklaus (27:15.545)
to where it can compete with an all cash offer. Because you’re representing Fix and Flippers who would like to keep some of the cash in their pocket, keep their powder dry, because as soon as they acquire it, they want to start a 90 day or shorter window to go in and do everything. Let’s rip the counters out, let’s get the marble in, let’s do all of the cosmetics we need to do to put a little lipstick on this pig and turn her into a princess so we can resell it and or convert it to rental.

Dylan Silver (27:40.878)
That’s it.

Mike, we are coming up on time here. Where can folks go to get a hold of you?

Mike Miklaus (27:50.329)
They can go to myintegritymortgage.com and subscribe to my YouTube channel. They can go to LinkedIn and find me under Mike Miklaus and click on my link tree and all my connections are there. Or they can follow me on Instagram. Would love to have them.

Dylan Silver (28:08.14)
Mike, thank you so much for coming on the show here today.

Mike Miklaus (28:11.599)
I appreciate you, Dylan. It’s been a delight to talk to you and I want to follow your career because I know it’s going to be a good one.