Speaker 1 0:00

The following program. The ENT , mortgage and Realty Show is paid for in full by ENT mortgage, LLC and equal housing lender consumer access.org number 2 5 5 3 6 8. The advice and opinions expressed during the Academic Mortgage and Realty Show are solely that at the hosts and guests of ENT mortgage, LLC, and not WTMJ or Good Karma Brands.

Speaker 2 0:21

Welcome to the Accu Net Mortgage and Realty Show, getting you inside information on buying, selling, and financing your home with expert advice from Anette Mortgage and Realty. And now, here's Brian Wicker and Tim Holman. Welcome

Speaker 1 0:37

To the ANet Mortgage and Realty Show. I'm Brian Wicker, licensed real estate broker with ANet Realty Advisors, and also the majority owner of ANet Mortgage, along with my son in-Law , Tim Holdman.

Speaker 3 0:48

Good morning, Brian. Thanks for having

Speaker 1 0:49

Me. Good morning. Tim is one of our senior loan consultants. If you've got a question or a comment, you can call or text us on the WTMJ talk and text line, which is 8 5 5 6 1 6 1 6 20. And remember, you can get a copy, a podcast of today's show or any of our past shows wherever you normally get your podcasts. Maybe you wanna subscribe. Uh, well, last week , uh, was a big week, Tim, for economic reports.

Speaker 3 1:14

Yes, indeed. Big is , uh, the nice way to , to put it, I guess. Yeah. Yeah. It was a big

Speaker 1 1:18

Week. And we have , uh, we had three reports come out and remember this, folks, price inflation and a strong economy are bad for mortgage rates. The

Speaker 3 1:28

Enemy of mortgage rates. Yes .

Speaker 1 1:29

On Tuesday, the Labor department provided their measurement of price inflation for January at the retail level, which is called the Consumer Price Index. Mm-Hmm . <affirmative> or CPI. And unfortunately, the report showed prices were higher than what economists have expected. If you look at it , uh, and you look at core inflation, which excludes food and energy. Uh, and that came in at 0.4% Yep . Compared to December. And economists were expecting 0.3.

Speaker 3 1:58

Right. So it's really, it's more about were they just higher than expected? Mm-Hmm . <affirmative> . Right . It's all about did it match expectations or was it worse or better than expectations

Speaker 1 2:06

In this case? A little worse. Yeah. And then year over year, that core inflation was 3.9% for January. Uh, and that was over and against an expectation for it to calm down to 3.7. Right. So stock market didn't like that. <laugh> , no . Bond market didn't

Speaker 3 2:23

Like that. Mortgage rates did not like that.

Speaker 1 2:25

Mortgage rates did not like that. And so using rates reported by Mortgage News daily emphasis on the word Daily.

Speaker 3 2:32

Daily, yeah .

Speaker 1 2:33

'cause they update their rates daily. <laugh> , the 30 year fixed conventional conforming rate with all the right stuff increased to 7.13%

Speaker 3 2:42

Oh . Over seven, again, after

Speaker 1 2:43

The CPI report, whereas it was 6.96 the day before. Right. Um, the recent low point , uh, reported by mortgage News daily, do you want to hazard a guess on what the recent low point was?

Speaker 3 2:54

6.7.

Speaker 1 2:55

6.620.

Speaker 3 2:57

All right . 6.62 ,

Speaker 1 2:58

Which was back in de mid-December. Yeah . Then it went up, and then it came back down actually to 6.63 mm-Hmm. <affirmative> , uh, on February 1st, someone buying the median priced home in southeastern Wisconsin, which for 2023 was $310,000 and putting 25% down , uh, if they have a , a monthly payment at 7.125, that's $77 higher. Yep . Than if it was at 6.625.

Speaker 3 3:24

Right. 77 bucks a month. Yeah. That's

Speaker 1 3:27

Not a lot.

Speaker 3 3:28

No.

Speaker 1 3:28

But the rate with the seven sounds so much worse.

Speaker 3 3:32

It's , it's a total mental thing at the end of the day. And, you know, you and I were talking off air , it's no one, I , I shouldn't say no one. Very few , uh, home shoppers in my , uh, opinion are looking at mortgage news daily or some equivalent website where they're literally monitoring rates on a daily basis. So, you know, I kind of chuckled, and I'm sure you did too. A lot of these articles, and maybe we'll talk about some of 'em , the , you know, the headline is, oh, rate rates shoot up, discouraging home buyers, you know , uh, this, that, and the other thing. And it's like, I bet you most people weren't even aware of the change or fluctuation in rates as they were home shopping. Correct. You know, they're still gonna be out there looking and if the news is , uh, sorry, your monthly payments gonna be about 77 more dollars a month until rates come down and you refinance. I bet you the serious ones are probably not gonna get , uh, discouraged too much by that news.

Speaker 1 4:20

I would agree. Yeah , I would agree. Yet it makes for good headline fodder. Of course. Yeah .

Speaker 3 4:23

Um , good

Speaker 1 4:24

Quick , ba I have , I have a client that I talked to , um, and we're gonna talk about it more later on the show who got an accepted offer over the weekend and I was kind of texting him and saying, well, okay, now here it is Monday , uh, we got this big report that comes out on Tuesday. Yeah . You know, do you want the bird hand?

Speaker 3 4:42

See

Speaker 1 4:42

What happens? Or you wanna see if it gets better. And he delegated the decision to me. Oh,

Speaker 3 4:45

That's

Speaker 1 4:45

Good. Which I took my father's advice, Jack Wicker, the first, and I said , um, we're locking. Yeah . Oh . And so we are looking smart

Speaker 3 4:53

And you look like a genius now

Speaker 1 4:55

<laugh> Well, you know, better lucky than good, but we got 'em a 6, 9 9 on Monday with no points and just $994 in total loan costs . And , and again , pretty solid. Yeah . We'll talk a little bit about more, more of that later. Well then on Thursday we got the retail sales report. Mm-Hmm. <affirmative> , remember, two thirds of our great economy depends on consumer spending, not on what Boeing spends to make airplanes or what the government spends. Just you and

Speaker 3 5:20

Hs people deciding to go out and buy stuff and

Speaker 1 5:22

Buy stuff. And so that report came in worse than expected. Yeah. Uh, the market had been expecting a drop of 0.3 mm-Hmm . <affirmative> . And the drop was 0.8. Oof . So I am half a percent different . Well, that was helpful for mortgage rates. And we gained back, what did you think? About a half?

Speaker 3 5:40

About a half of what we lost. Lost. Yeah.

Speaker 1 5:42

Well then along comes Friday and we learned that inflation at the wholesale level in January, that's called the producer price index. Son of a gun that was hotter than expected. Again. Yeah . A 0.5% on core inflation against an expectation of just 0.1. So that was once again, unfriendly for rates. Yeah. Put it all in the blender. And if you wanted to get a $250,000 mortgage with 25% down 70, 87, 80 credit or better , uh, and all the other Right . Stuff from your friends at low overhead ACU net , we could still deliver a 6.99 rate as of Friday. And that would be with $1,560 in points with the A PR 7.08. And remember that we still have our excellent special 30 year fixed money for first time home buyers. Yep . That's for , uh, households of three or more people. You can make up to 114,885 for one in two person households. You can earn up to 99,900. That rate is 6.125% with 20% down. The APR is only 6.14. Alright. When we come back, I want to talk a little bit more about this client that we helped get an accepted offer over the weekend. You are listening to the Accu Mortgage and Realty Show on AM six 20 WTMJ

Speaker 2 7:04

Home buying advice from the guys who know it best. This is the Accu Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 1 7:13

Welcome back to the Academic Mortgage and Realty Show. I'm Brian Wicker and that over there is Tim Holdman, my son-in-Law and Super Senior Loan Consultant at Academic Mortgage. Thanks . Good

Speaker 3 7:23

Morning. A little bit more senior every day . There

Speaker 1 7:25

You go. That's right. Me too. Alright, so on , uh, Thursday I got a, Hmm , what was it ? Oh , somebody clicked on the blue button. Nice. And , uh, and wanted help with the pre-approval. And it turned out it was a referral from Jim Cantrell who owns Financial Strategies, a financial advisor, and out to Jim that knows Jim. I thought, well, you know what? I'm not that busy. I'll contact this customer and see what's up. 'cause I don't,

Speaker 3 7:51

The customer got a loan directly from the boss. Yeah . Brian Wicker.

Speaker 1 7:55

So , uh, really strong buyers. They had been renting, interestingly, they sold their primary residence three years ago and they were renting, but now they wanted to buy again and they wanted to buy on a place with little acreage. So they're looking at, and they had a place in mind. Okay, very cool. On five acres. And so we were talking strategy, got their w twos, got the asset statements from financial strategies right away. So bing bang, boom. Yep . Excellent credit. So I'm writing, you know, getting ready to issue the rock solid guaranteed preapproval letter. And I say to the, the husband in this case, okay, so tell me about this property again. Yeah. We saw it, you know, yesterday and then, oh, you saw it with a listing agent. Hmm . Yes you did. <laugh> . Uh , how are you gonna plan to write the offer and how is it gonna use the listing agent? Sure. Tell us the , um, potential issue with that, Tim. Well,

Speaker 3 8:51

The listing agent would love that because they don't have to split their commission with a buyer's agent. Right. But you know, the way I explain it to customers is you're allowed to do that. You're allowed to write , you know, make an offer with a listing agent. But in my opinion, it's kind of a conflict of interest because the seller's realtor, or the listing agent as it's commonly referred to as , as they have a fiduciary responsibility to get the seller of that house the best deal possible. That usually That's right . Its highest purchase price, you know, so on and so forth. You know, how can that agent also simultaneously work to get you the best deal as the buyer?

Speaker 1 9:27

They can't and, and they are obligated under the realtor's code of ethics to treat you. Mm-Hmm . <affirmative> as a customer Right . And treat you fairly. But if you ask that listing agent, what do you think I should offer? The only thing that that listing agent can say is the listing price. Right. And so , um, so luckily we're friends with , uh, attorney Pat McMahon, who's both a real estate broker and an attorney. And I said, maybe you want to consider using Pat as an attorney. Yeah. Not in his role as not as a full , so he's not gonna get a piece of the commission. He's just gonna charge you

Speaker 3 10:02

A flat fee, a

Speaker 1 10:03

Little flat fee to , to write up the contract. Mm-Hmm. <affirmative> so that you have the peace of mind of knowing that somebody is on your side Yeah . And is explaining, you know, things super thoroughly.

Speaker 3 10:12

Yeah . Pat is a super valuable asset. I've, I've tapped him on the shoulder a lot for, for sale by owner transactions. Yeah . Right . And similar thing, he won't take a cut of the commission, but he can still write up the contract and advise you as a real estate attorney, which is very helpful.

Speaker 1 10:25

Right . So then I say to the buyer, well, you know , you know, let's see if we get a , uh, appraisal waiver on this property. Sure. Can you gimme the address? And I put it through and unfortunately it didn't get it. Okay . Which is, even though they're making a big down payment. Okay.

Speaker 3 10:40

Sometimes it just, we , we don't get it. I checked one last week. Same thing. Yeah. Well ,

Speaker 1 10:44

And it's, I think it's because it's a little more rural. Sure. Right . Not , not as much data out there. It's not Yeah . The computer systems, the data just isn't there to say, yeah, I've got a lot of data, points of property this . And so we didn't get that. And I said , uh, but let me explain this idea called appraisal wiggle room. And he says, Brian , I listened to you ads <laugh> . I know what that is.

Speaker 3 11:06

Oh ,

Speaker 1 11:07

Oh , it was great. Right.

Speaker 3 11:08

Yeah. Music to your ears. Yeah . Yeah.

Speaker 1 11:09

Music to my ears. And so they're putting enough down where, you know, we were talking about, well , how much appraisal wiggle room could you offer these people Right.

Speaker 3 11:18

And keep your risk minimal. Yeah.

Speaker 1 11:20

And the answer was a lot. Awesome. So they ended up putting in their offer with something like $19,000 of appraisal, wiggle room.

Speaker 3 11:27

That's pretty good. Yeah.

Speaker 1 11:29

And , um, with their , uh, big down payment. And then the other key thing was that I believe the sellers are moving outta state . Okay. Okay. And so I'm not exactly sure who was the intelligent person driving this, but they found out that the , um, date for occupancy was potentially important ah , to the sellers. And so they wrote their offer with a 60 day close Mm-Hmm. <affirmative> . Okay. And then offered free occupancy Sure. For another 60 days after that. Perfect . If needed. Why is that 60 day , uh, number important

Speaker 3 12:09

<laugh> ? Well, it's the maximum that they can legally offer to let the sellers live in the property. 'cause Fannie and Freddy's rules are, if you're buying a home and you're gonna call that your primary residence, you have to be able to take occupancy with no more than 60 days post-closing. Right . So if you wrote a 61 day post-closing occupancy, which I've, I've seen very agents miss this detail. Yeah . Yeah . Um, it , it can cause an issue for , uh, the financing where we have to underwrite it as a non-owner occupied mortgage.

Speaker 1 12:41

Right . Or change the contract.

Speaker 3 12:42

Right. Or the easier thing is to change the contract. Trust me. Yeah.

Speaker 1 12:45

When we come back, well , well , I already told people we did. They got their accepted

Speaker 3 12:49

Offer, Hey,

Speaker 1 12:49

Against like four other competing offers or three or something

Speaker 3 12:52

Like that. Next week you'll have to update us on the appraisal and, and where that

Speaker 1 12:56

Comes in . Well , that's right. 'cause we ordered the appraisal already and Sure . That's in the works. Yep . So we'll see what happens with that. But that's great. That's, that's a fun thing when you

Speaker 3 13:04

That's how it should go. Yep . And they

Speaker 1 13:05

Write their offer and they get it on the first try.

Speaker 3 13:08

Boom . That's the dream. We're

Speaker 1 13:09

Doing all the right stuff for 'em. Alright . Mm-Hmm. <affirmative> , when we come back, we're gonna talk about an article that I saw online with some little misleading headlines. You are listening to the ADE Mortgage and Realty Show on Wisconsin's radio station AM six 20 WTMJ,

Speaker 2 13:23

Getting you into the home of your dreams . Here's more of the ACU Mortgage and Realty Show with Brian Weer on WG MJ.

Speaker 1 13:31

Welcome back and thanks for listening to today's show. So Tim , uh, you know, I always just Google before we do a radio show, you know, housing market news. And so two of them came up that I wanted to address. One was from Newsweek quoting a rate of like 6.85 on a third of your fixed rate, which, you know, people that are in the business , uh, hate the Freddie Mac <laugh> Thursday news release. Yeah . Because it's,

Speaker 3 13:58

It's misleading. It's

Speaker 1 13:59

Backwards looking and it's like over a three week average. So it'd be like, if you're telling people what's the temperature today? And you were reporting what was the average temperature of

Speaker 3 14:09

Over the last three weeks at average to be this? Well, that's not

Speaker 1 14:12

What I amm what is it today? And it's not helpful. Yeah . So as we reported earlier in the show , uh, the current , uh, average 30 or fixed rate for a conforming loan in America is about a hair over 7% according to mortgage news Daily <laugh> because they report the rates daily. Well then this other , um, so that was one thing I just wanted to get out there. If you want real rates and UpToDate rates, mortgage news daily is your friend ,

Speaker 3 14:40

I'd say more often than not on my Google feed, the articles I talk about rates are not correct. 'cause they're not looking at the most recent data. And I mean, in a volatile week, which this has , this has been a volatile week for sure. Yeah . Yeah. Every single day the rate could be significantly different either up or down.

Speaker 1 14:55

And , and yet serious home shoppers aren't that glued. No. Uh , to that. Um, and so, so let's say that , uh, that's, that's one issue. Mm-Hmm . <affirmative> . Now, the other thing, the other headline, and I like Redfin. Redfin is a publicly traded , uh, real estate brokerage. Mm-Hmm. <affirmative> . And they have a great economics department and they do a really good job grinding the numbers. Well , the

Speaker 3 15:17

Headline and they're a lot in a lot of places too. Yeah.

Speaker 1 15:19

They're 400 , uh, uh, and they are in Milwaukee. They have an office in Milwaukee. The other interesting thing about their business model is their agents are employees.

Speaker 3 15:27

Right. Not independent contractors.

Speaker 1 15:29

Not independent contractors, which is, is the norm in the industry. So Anyw, who their , uh, February 15th , uh, news item says, housing market update, home prices and mortgage rates rise. Pushing would be sell , buyers would be buyers to the sidelines. And , and so, you know, that is a true statement perhaps on a national level. Right. And what I liked is they have this nice little leading indicators of , um, data, you know, that they're using to support that . So they do actually quote mortgage news daily, Hey, there it is with a 7.09% rate. Mm-Hmm . <affirmative> as of February 14th. And they say, Hey, that's up from 6.75 a week earlier and up from 6.54 a year ago. Mm . Alright , cool. Uh , they note that the misleading Freddie Mac average was 6.64 <laugh> . That's off by almost a half a percent . Yeah . Um , then , uh, purchase applications, they're quoting the Mortgage Bankers Association Mm-Hmm . <affirmative> as being down 3% from a week earlier up 1% from a month earlier. Oh , okay. But down 12% year over year . So Okay. That, that is an indication that there's less activity for sure. Yeah . But we don't know if that's because of buyers or lack of inventory. Right. Then the other cool thing that Redfin does is they come up with, they've come up with their own home buyer demand index, which is a measurement of requests for home tours and quote other home buying services from Redfin agents. And sure enough, that's down 6% from a week earlier and down 18% year over year .

Speaker 3 17:08

Yeah. Which, if you know logically if there's less , uh, showings or requests for showings, that would mean there's probably less offers being made. The demand , theoretically

Speaker 1 17:16

The demand , the demand side is down. And lastly, Google searches for homes for sale. They quote as being down 11%. Mm . Alright, so what does this mean if two things all that matters. So those are big global, national numbers, right? Yeah.

Speaker 3 17:31

That's, that's national data. And that doesn't really mean its necessarily the reality for our local market, the five county metro Milwaukee area.

Speaker 1 17:40

Well , and even within that, I have never met very few people <laugh> say, you know what, I will, I am willing to buy a house anywhere in the five county metropolitan area. So when it comes down to it, it's a , what is the supply and demand dynamic? Mm-Hmm. <affirmative> in that , in those smaller markets. Yeah . Yeah . In the much narrower , uh mm-Hmm . <affirmative> sub market in which you are looking yourself. Right. Um, so when we come back here after the upcoming news break , um, I want to tell a story about a first time home buyer couple that I was introduced to by the man's father looking to buy in Washington County in a specific price band. And a lot of interesting things to talk about , uh, with their story. Excellent. And very good students, you know, of, of this new thing to them, home buying game. But it's gonna come down to, Hey, what is it like in your little band that you're looking at? Right . It doesn't matter what the national numbers are. No. 'cause they may or may not apply. We'll get to that right after the news. Now it's time to turn it over to the WTMJ breaking news desk.

Speaker 2 18:55

Don't break the bank to get into a house. Back to the Accu and Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 1 19:03

Welcome back to today's show. I'm Brian Wicker, the elder here. That's my son-in-Law. Tim Holdman over there. Hello. Senior Loan consultant with Academic Mortgage. And so Tim, it's, we talked a a little earlier in the show about a nice , uh, introduction we received from a financial advisor. And, you know, the other thing, when you manage to stay in business, it'll be 25 years in July coming up Yeah. Is you get the multi-generational , uh, referrals. Mm-Hmm. <affirmative> . So this next story is about a , a first time home buying couple in their mid twenties referred by their dad , um, who we recently helped. And um , so the story here is looking to buy their first home in Washington County. And , uh, they're thinking in the three to $400,000 range. And so they filled out a really cool online application form, which is slicker than ever. Yep . Uh , and, and they, they were diligent, man. They, they uploaded their pay stubs, their W twos. I love that. Their bank statements. I mean, we had everything we needed right outta the gate. Yeah . Yeah. Before I even talked to 'em , <laugh> a week ago, Saturday , uh, Becky was driving us somewhere in the car and I had my laptop and we had a nice conversation. We had about a two hour drive. And so we talked for maybe about an hour of drive. And , uh, a couple things that are instructive about this that I think are , would be surprising for most of our listeners and any real estate agents too. Hmm . So the, the first thing , uh, that we're working on is , uh, in this case the wife's , uh, income. Is it eligible or not? Ooh . And so this gets to a topic that I think you and David have talked about before, and it's a hot topic in mortgage lending called Variable Income. Oh yeah . So Tim , yeah . What are the different kinds of variable income that we're talking about here?

Speaker 3 20:52

So variable income is, if I were to put it in a nutshell, basically anything that is not salary. So it could be hourly wages, it could be commission, it could be bonus income, overtime income. Uh , those are the four

Speaker 1 21:05

That I was

Speaker 3 21:06

Thinking of. There you go.

Speaker 1 21:07

So in this case, the wife had been working , uh, in, I'm gonna call it the HR industry or recruiting, something like that. Okay. Sure. And had been paid hourly, thank goodness. Now she switched to, I'm gonna call it the hospitality industry. Oh.

Speaker 3 21:21

So new employer, entirely new employer

Speaker 1 21:23

Entirely. And also switching industries. Yeah. And , um, and also getting paid hourly, but getting paid a higher hourly rate. And she's only been there since November. Okay.

Speaker 3 21:33

So

Speaker 1 21:34

I , I wanna point out that a, a ordinary mortgage company or bank would probably just ask the home shopper, how much money do you make? Mm-Hmm. <affirmative> . And she would've said $23 an hour, they would've gone great.

Speaker 3 21:48

No problem. Yeah. They

Speaker 1 21:49

Probably wouldn't have dug into the fact that Oh, hourly equals variable. Mm-Hmm. <affirmative> . And the rule book for mortgage lending says you have to have a two year track record of earning variable income. Well, she does.

Speaker 3 22:02

Yeah. But not at the same employer. But

Speaker 1 22:03

She not at the same employer and she kind of switched industries. Right. Okay. So that's kunk . We gotta solve that issue. Mm-Hmm. <affirmative>. Alright . Husband is salaried and, and so I'm working up the numbers and it's like, okay, what if we can't use her income? I'm always looking at what's our

Speaker 3 22:22

Worst Yeah . What's the worst case scenario. Case scenario. Yeah .

Speaker 1 22:24

And, and the answer is, if we don't do anything with their financial picture , uh, they could afford to buy about a 320, $330,000 home.

Speaker 3 22:38

And this is just off the husband's salary. This is

Speaker 1 22:40

Just off the husband's salary. Got it. And what I think most people, most even of our customers don't realize unless we explain this to them, we're actually, whenever we pre-approve somebody, we're approving you for a payment.

Speaker 3 22:52

Okay. Right. We're

Speaker 1 22:53

Saying how much of a monthly payment can you afford? Which is made up of lots of , uh, assumptions. Like how much money do you have to put down? Mm-Hmm . <affirmative> versus the purchase price.

Speaker 3 23:07

Right.

Speaker 1 23:08

Then the other thing that is, what about the property taxes on the home? Now luckily there , they're looking in Washington County where the property taxes are

Speaker 3 23:17

Much lower.

Speaker 1 23:18

Lower . Yep . And then the third thing is, is there gonna be any private mortgage insurance Right. Involved, which the pricing on that can vary Yeah.

Speaker 3 23:25

Based on credit score and loan program and all , all

Speaker 1 23:29

Kinds of things. Yeah . Um, and then homeowner's insurance, let's not forget that homeowner's insurance has gotten more expensive of late Yeah . And, and is a real factor, especially when you're trying to cut it close. Right. Okay. Yeah . So in their particular case , uh, the scenario was, well, if you buy a $330,000 house and put 10% down, so $33,000. Yep . Um , and that property only has $3,600 in property taxes and the homeowner's insurance comes in at 1300. I'm trying to go a little bit on the high side with that Yeah .

Speaker 3 24:05

Just in case. Yeah. Yeah .

Speaker 1 24:06

Then, you know, you can afford to buy that home with just Mm-Hmm . <affirmative> the husband's income,

Speaker 3 24:12

But there's no wiggle room on that, I'd imagine. Or very little very, which means, you know, don't go out and open up a new credit card to buy that new bedroom set a week before closing. Very correct. You know ? Yeah .

Speaker 1 24:22

When we come back, I'm gonna tell you the other , um, clever thing that I found as a solution to boost their purchasing power.

Speaker 3 24:29

Excellent. Good.

Speaker 1 24:30

We will get to that when we come back. You're listening to the Academic Mortgage and Realty Show on the biggest stick in the state AM six 20 WTMJ.

Speaker 2 24:40

Important home buying questions and answers you can count on. This is the Acura Mortgage and Realty Show with Brian Wicker on WTMJ. Welcome

Speaker 1 24:50

Back and thanks again for spending a little bit of your Sunday with us. Uh , we're just telling a story about a first time home buying couple looking to buy in the three to 400,000 range in a Washington County. Have a nice nest egg , uh, saved up. Uh, they're willing to and , and , and plus Tim, they don't want to use all of their money Good . Which is good.

Speaker 3 25:10

Yeah. Leave some in the bank, but they've

Speaker 1 25:11

Got about $40,000 year marked for this home purchase for down payment and closing costs .

Speaker 3 25:16

Good for them. That's,

Speaker 1 25:18

And , and folks, remember it's not just the down payment. You have to put money aside away for your future property tax escrows. Mm-Hmm . <affirmative> , you have to pay for

Speaker 3 25:25

First years homeowner's insurance premium. Yeah .

Speaker 1 25:27

First years homeowner's insurance, which, you know, could be a thousand or $1,300. Don't forget you gotta pay for home inspection. Yeah . You know, that's 500 bucks. You do that before closing. There's all kinds of little things. Uh , loan costs at ACU are running about

Speaker 3 25:41

13, 1300 ish , hundred

Speaker 1 25:42

Ish Right now. Unless you're gonna pay points. Right .

Speaker 3 25:45

Which is voluntary.

Speaker 1 25:46

Don't have to . So , so we're talking about okay. That a challenge that we are working on is whether or not we can use the wife's hourly income because she changed industries.

Speaker 3 25:55

'cause the , the whole point is we're trying to sniff out these potential issues before you go out and fall in love with a house. Right. You know, buyers out there listening to this, this is part of what we do. We want to give you that confidence, that peace of mind that the mortgage is all but approved by the time you actually go out and make it .

Speaker 1 26:11

Right. The only thing that's in question is maybe the property. Right. So in this particular case, so academic mortgage doesn't collect monthly payments. Uh ,

Speaker 3 26:20

We are not the servicer

Speaker 1 26:20

The loan , we're not the loan servicer. And so we end up transferring the servicing , uh, to other much larger companies. And the benefit of that is what we're gonna do now is we are getting , uh, formal written verifications of employment from this woman's previous two employers and we're gonna take all the information and we're gonna put that on the altar of the underwriter at one or more Fannie Mae, Freddie Mac servicers.

Speaker 3 26:46

Right. Which is to see which , which is a nice ability that we have. We don't just have one kick at the can when it comes to approval.

Speaker 1 26:52

Correct . Correct. So, so we're gonna ask, okay, are you willing to allow the use of her hourly income? Right . Uh, another thing in our hip pocket is maybe we'll get her new employer to guarantee her Mm-Hmm.

Speaker 3 27:05

<affirmative> 30 hours. Maybe they're not I've done that before. Okay . If they're willing to write a nice short letter saying, you know , uh, Mrs. Smith is guaranteed to work x number of hours per week , uh, if not more. Right. You know, then that is , uh, gives more confidence to the underwriter, underwriters say, yes, that , you know, we can use this, you know, hourly wage as basically guaranteed for lack

Speaker 1 27:26

Of a better word's. So we'll see that that's yet to be determined. But in the meantime, right away, after talking to him on Saturday, I had an idea, here's how we can, you could go buy a house today. Mm-Hmm. <affirmative>

Speaker 3 27:35

With just your salary. Right .

Speaker 1 27:37

With just the husband's salary. Yep . And the answer is up to $330,000 if we don't do anything with the rest of your financial picture, but we can go all the way up to 370,000 American dollars. Nice. If we take $17,800 of the money that you earmarked for down payment. Mm-Hmm. <affirmative> and closing costs and we pay off your car loan. Oh, interesting. Which has a $383 monthly payment Sure. At an interest rate of 8.12500.

Speaker 3 28:09

So you're already paying more interest on that borrowed money than you would on the mortgage anyways. Yeah . Theoretically

Speaker 1 28:13

On rate wise , rate wise , they'll have that paid off in five years, but Good point. But interestingly, that lowers their total monthly obligations by like $270 a month.

Speaker 3 28:23

Right. They're monthly nuts . Yeah. Correct.

Speaker 1 28:26

Furthermore, and this is shocking to me, Tim , uh, we have , uh, the ability to do predict estimate what would happen if we make certain maneuvers to your credit score. Mm-Hmm . <affirmative> because the husband has a very good credit score 7 47 Sure. But that's now third banana.

Speaker 3 28:46

Yeah. They used to be top tier , anything over seven 40, but that recently changed.

Speaker 1 28:50

Right. So now you got the seven 60 to 7 69 tier and uh, and then seven 80 and up is the best. Right. So interestingly, if we pay off the car loan, our credit , um, predictor gives a 55% likelihood of his credit score improving above seven 80.

Speaker 3 29:12

That's surprising to me.

Speaker 1 29:13

I I never, this is like shocking that paying off an installment loan Yeah . Would impact positively a credit score. The other two things though that they can do, and they don't have a lot on , uh, their credit, you know, they're not credit card users, but another thing was paying down a credit card that has a seven 50 balance down to zero. Right. So not a lot of dollars for somebody that's got 40 grand.

Speaker 3 29:39

Yeah . But it frees up the utilization, which is

Speaker 1 29:41

Key. Correct. And the other one was just pay it down by like 350 bucks some other little card they have . Nice. Yeah. And that'll get us into the seven 60 range. Mm-Hmm. <affirmative>. So there are things that we can do and you , the way that's gonna impact their financials, it's gonna lower the cost of the private mortgage insurance. Right.

Speaker 3 29:58

Which means lower monthly payment, which means they qualify for more house at

Speaker 1 30:02

The end of the day. Wait. And there's more. The other cool thing about only using his salary is that we are then qualify for Fannie Mae's special 30 year fix rate program called Home Ready .

Speaker 3 30:15

Excellent.

Speaker 1 30:16

Which is limited to 80% of area median income.

Speaker 3 30:19

May maybe we should leave the wife's income outta the picture anyways.

Speaker 1 30:22

It it is. You know, it just, it all depends. Yeah. Alright, when we come back, I got one more nugget to share about that. I'm gonna drill down on what is the supply and demand dynamic for where they're looking. Good. We got that. And a little bit more coming up right after this break. You're listening to the Academic Mortgage and Realty Show on AM six 20 WTMJ.

Speaker 2 30:42

Find a place to call home without the headache. This is the ACU Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 1 30:51

Again, thanks for tuning into today's show. That's Tim Holdman, senior loan consultant with academic mortgage over there. Taller, more handsome, younger

Speaker 3 30:59

<laugh> . You flatter me. Father

Speaker 1 31:00

Of my grand two grandchildren. Two oldest grandchildren. And I'm Brian Wicker, the elder. So talking again about this , uh, couple who's looking to buy their first home in Washington County in the 300 to 400,000 price range. One more element to that story. This is kind of the complete story, Tim . Oh yeah. You know, it's about oh, which, which people's income do we use?

Speaker 3 31:19

Yeah. This is next level loan consulting. This is not , uh, you know, McDonald's mortgage where someone applies and they just get their loan. This is diving way deeper and I think providing a way better level of service than you would get at a lot of different mortgage companies.

Speaker 1 31:34

Well , thank you. And so, so one of the elements was, okay, how are you gonna conduct your search? Well, we were given the name of somebody, a real estate agent. Sure.

Speaker 3 31:42

Everyone knows a realtor or six.

Speaker 1 31:44

That's right . So let me, let me, let me just crack open the hood on multiple listing service and see if there is some realtor in that area who has worked with more buyers. You know, it is just kind of rank 'em . Yeah. Okay .

Speaker 3 31:57

Someone with more reps is typically gonna be a , a better choice, more experience. So I

Speaker 1 32:02

Did the search for Washington County last two years, 300 to 400,000 single family detached price range. Okay . And I came up with somebody who had seven transactions,

Speaker 3 32:11

Which in that, again, that , that small micro market Yeah . We're talking about, you know, the smaller market. That's a lot . That's a lot .

Speaker 1 32:17

That's a lot for that little thin

Speaker 3 32:18

Slice. Absolutely.

Speaker 1 32:20

And uh, and then the person that they, who they gave the name of had two Yeah . One in each year. So I mean, they're gonna have to decide. But I called this agent who happens to be the owner of the real estate brokerage and had a nice chat with her , uh, because she's also licensed in Florida. Oh . Where academic mortgage is also

Speaker 3 32:39

Licensed . Amazing.

Speaker 1 32:40

And amazingly, I , so I said, okay, you're probably running a team, you know, would you, who would you hand these people off ? She says , oh no, I'll work with 'em.

Speaker 3 32:47

Excellent. Like ,

Speaker 1 32:47

Awesome. Um, so I've yet to tie the ribbon on that and , and explain to them , uh, okay, this looks like a good fit to me. But the other element I haven't shared with either of them is looking at that subsegment and I'm kind of nerdy , uh, Tim, you know that I'm a pivot table guy, <laugh>. And so I have in front of me here , um, stats for that subsegment 300, 400,000 , uh, dollar single family detached in Washington County. And last February , uh, 43% of those buyers paid over asking and then it quickly spiked to 78% in March. 82% in April.

Speaker 3 33:31

Yeah . Market was heating up. Yeah .

Speaker 1 33:32

85% in May and kind of stayed, eh , bounced between 60 and 69% through September. Sure. So this is a tail to, you know, this is the time when demand is higher. Right . Right. Yeah . We're , we're getting into it. So you should

Speaker 3 33:50

Expect we're ramping up now, by the way,

Speaker 1 33:53

A percentage of buyers who paid $10,000 or more over asking in this micro market , 33% in March, then 53%, 54%, 49% that takes you through June 53% in July di down to 44% in August, but then back up to 58% in September and then it tails off. Yeah. Right. So again, supply and demand is this magical <laugh> economic

Speaker 3 34:19

Phenomenon. Yeah .

Speaker 1 34:21

Uh , that the next conversation, you know, I'm gonna have with these young buyers is, okay, now you gotta be prepared to probably pay more than the asking price.

Speaker 3 34:32

Right. And that's not actually that scary because in terms of , uh, what it does, your monthly payment for every extra thousand dollars that you borrow Yeah . Increases your monthly payment on a 30 year fixed rate mortgage by like six $56 and 50 cents a month. Yeah. Six

Speaker 1 34:45

50. Yeah .

Speaker 3 34:46

So I , I like to frame it in those terms 'cause that's way less scary if you're gonna say, I'm gonna offer , uh, $10,000 or more. That's really just, you're increasing your monthly payment by 60 ish dollars a month.

Speaker 1 35:00

And, and then though, what we have to educate them on and , and luckily they have resources and this is all, it's a multi-variable equation. Mm-Hmm. <affirmative> , the powerful thing to the seller is to say, Hey, your house is listed for three 50, I'm going to pay you 360 and still buy it. Even

Speaker 3 35:17

If it apprais is for ,

Speaker 1 35:18

Even if appraised is out at three 50 , that's what we call appraisal wiggle room. Yep . And that is such a powerfully attractive idea. Mm-Hmm.

Speaker 3 35:26

<affirmative> to the sellers. Yeah. Because

Speaker 1 35:27

Otherwise you, Hey, I'm gonna pay you 50 grand over your asking price, but it's gotta appraise for that. Well, that's kind of an empty , uh, offer.

Speaker 3 35:34

Yeah, exactly. Alright,

Speaker 1 35:35

So we'll keep you up , uh, up to date on that. Yeah. As, as the weeks roll on, hopefully we'll get another fast result.

Speaker 3 35:41

Do they have a timeline where they want to , you know, buy by a certain time period? Sure ,

Speaker 1 35:45

Yeah , because they got , they're tot they go month to month on their lease , uh, shortly . So they ,

Speaker 3 35:49

Which probably means their rent goes up.

Speaker 1 35:50

Exactly. Yeah . So they're motivated. Good. Better sooner than later. Alright , that's all the time we have for today's show. Thanks again, Tim, for filling in today. Happy to. You've been listening to the Academic Mortgage and Realty Show on Wisconsin's radio station AM six 20 WTMJ. The proceeding was a paid program. Advice and opinions expressed during the Academic Mortgage and Realty show are solely that of the host or guests of academic mortgage and Academic Realty advisors and not WTMJ Radio or Good Karma Brands. Milwaukee, LLC.