The following program. The ENT , mortgage and Realty Show is paid for in full by ENT mortgage, L L C 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, L L C, and not W T M J or Good Karma Brands.
Speaker 2:Welcome to the Accu Net Mortgage and Realty Show, getting you inside information on buying, selling, and financing your home with expert advice from Accu Mortgage and Realty. And now, here's Brian Wicker and
Speaker 1:Tim Holdman. Welcome to the Anette Mortgage and Realty Show, the October 15th edition. I'm Brian Wicker, licensed real estate broker with ANet Realty Advisors and the majority o owner of Aade Mortgage, along with my son-in-law, who is one of our top senior loan consultants. Uh, Tim Holdman . Welcome back to the show, Tim. Good morning,
Speaker 3:Brian. Thanks for having me. And
Speaker 1:Remember, you can also get a copy of today's show and all our past shows, wherever you normally get your podcasts. Absolutely. Alright , well let's start off talking. Well , let's congratulate my son David and , uh, daughter-in-law, Christie . Yes , indeed .
Speaker 3:And your
Speaker 1:Brother-in-law <laugh> . So we, we have a new , uh, grandchild or niece as we call it in the house here this last week A Healthy Girl was born and that's why David's got the weekend off. So we're delighted , uh, about that development.
Speaker 3:Yeah. Grand baby . Number four for you. Grand baby . Number four.
Speaker 1:That's right. Yeah .
Speaker 3:The brood is growing. Yeah ,
Speaker 1:Absolutely. <laugh> . So we're happy about that. Alright , now , uh, as David points out , uh, his new daughter's gonna graduate and what was it for ?
Speaker 3:Oh geez . 18
Speaker 1:Years old . 2041. Yeah.
Speaker 3:One that's a , we
Speaker 1:Thought . Okay . Wow. Alright . So and likely live to be over a hundred, just
Speaker 3:By the way. Yeah. Statistically. Statistically Yep .
Speaker 1:Along with all the other babies that were born this week. So, alright . Um, what's happening in real estate and Mortgage World? Uh , we had , uh, two things impact mortgage rates this past week. Yep .
Speaker 3:Uh ,
Speaker 1:One of those was sadly the terrorist attack and the war in Israel and Gaza. And anytime there's geopolitical unrest that tends to make the interest rate world , um, more attractive to investors. Right.
Speaker 3:We tend
Speaker 1:To sell stuff lower
Speaker 3:Risk. Yeah . Lower
Speaker 1:Risk, right. They tell to tend to sell the riskier asset stocks and buy safer things like government bonds and mortgage-backed securities, mortgage taxes . Right. But then the other thing that we had happen, which then had a counter effect on this was the consumer price index. Because remember , uh, the reason that mortgage rates are high , uh, is that inflation has been high, now it's been coming down mm-hmm.
Speaker 3:<affirmative>
Speaker 1:And , uh, and the consumer price index report, which measures inflation at the retail level, was actually in line with expectations Yeah.
Speaker 3:On
Speaker 1:Thursday. So, Tim, why, why did that make rates get a little worse? Well,
Speaker 3:Apparently investors were expecting the , uh, the c p i , the consumer price index , uh, data to come back weaker
Speaker 1:Ah ,
Speaker 3:Than the forecast. Yeah. Weaker than the forecast. So just by it coming in at expectations that actually had a knee-jerk reactions of , of rates going up a little bit. Unfortunately , uh, overall for the week they're down for sure compared to the prior week. But that was a little bit of a , um, unwelcome day on, on Thursday, you know, compared to the overall story of the week. So
Speaker 1:Let's just say, you know, today , uh, or as a Friday I should say, we could do a , uh, 30 year fixed rate, 25% down on the 310,000 , uh, median price for the five county Milwaukee area. So at a 7 3, 7 5, 1 paying points, almost everybody is paying points now to get the rate Yeah.
Speaker 3:Down
Speaker 1:Some that would give you an a p r of 7.56 and, and you know, last week maybe that rate would've been 7.625%. Right . That's a quarter point different , which I don't get too excited. <laugh> , it's about a $40 per month
Speaker 3:Difference
Speaker 1:In payment on a $232,000 loan amount. I think
Speaker 3:It bears mentioning, though I'm sure you've mentioned it before, we, we still have access to the special super low first time home buyer rate from wida a Wisconsin specific program where that rate for first time home buyers if they qualify for the program is a 6.625% rate as of today with no points.
Speaker 1:I'm glad you , uh, brought that up. And if you don't have it memorized We'll
Speaker 3:I'm flying the WIDA banner to anyone who listens.
Speaker 1:That's right. Uh , and the maximum income you can have on that, I believe is $99,800 if you're a one to two person household. Correct.
Speaker 3:Yeah . And
Speaker 1:Do you have it memorized what it is if you're three to four? I wanna say it's like one 18. Yeah ,
Speaker 3:I was gonna confirm one 16 . We well we will confirm that . Alright . I , we'll confirm
Speaker 1:That and get that back to you. Alright. So, so rates are not like tumbling down
Speaker 3:No. They
Speaker 1:Just basically stop getting worse.
Speaker 3:Yeah. Which, I mean, we'll take whatever win we can get at this point, but bottom line is like, like you said, it's all about what's the difference in the monthly payment. That's
Speaker 1:Right. Right . Yeah . And so , uh, Tim, we, you had a super busy week helping people buy homes. I think you had
Speaker 3:Five
Speaker 1:Applications. Yeah,
Speaker 3:Yeah . Which is
Speaker 1:Monstrous this in ,
Speaker 3:In this environment. That's, that's big and yeah, I mean there's still people out there , uh, who are looking to buy some for sale by owners , some with realtors. Okay. And , uh, we are standing by to assist by the way I just looked up , it's $114,885 Oh . In Milwaukee County for a three person plus household for wida .
Speaker 1:Alright . So, you know, we're all about triage. Yeah .
Speaker 3:When
Speaker 1:Somebody comes our way, we are checking all the boxes, kinda like a pilot on takeoff mm-hmm . <affirmative> , how can we get this particular person? And there are tricks to the trade folks.
Speaker 3:Absolutely. Uh ,
Speaker 1:Uh , as to what can we do to , um, ethically manipulate the information in our favor in the , our borrower's favor mm-hmm .
Speaker 3:<affirmative> to
Speaker 1:Try to get you the best possible deal. Yeah . Alright . Well , uh, I had a call from a dad this week. I was actually sitting at David's desk <laugh> because he was out. It was this, it was on Thursday and I , I think I just happened to pick up the main line. I thought I was answering David's phone. Oh sure .
Speaker 3:But
Speaker 1:I just , I think I picked up the main line. This guy's like , wow, I'm talking to Brian Wicker. I'm like, yeah,
Speaker 3:Yeah,
Speaker 1:<laugh> . Uh , and so I'm gonna tell you about his question. He was, he had two questions , uh, about hi helping his daughter and son-in-law purchase their next home. One of them is about trying to make their offer a cash offer, but then the other one had to do with my advertising , uh, that we've had a lot of ads lately talking about how we can do property specific pre-approvals with no appraisal required. I'm gonna tell you about his question 'cause I think it's a couple of good ones when we come back. You're listening to the Academic Mortgage and Realty Show on AM six 20 W T M J
Speaker 2:Home buying advice from the guys who know it best. This is the ACU Net Mortgage and Realty Show with Brian Wicker on W T M J.
Speaker 1:Welcome back and thanks for tuning into today's show. Uh , before the break I was mentioning I got a call from a dad , uh, of a pre-approval client we're already working with and , uh, we're trying to help 'em purchase their next home. So not a first time home buyer.
Speaker 3:Okay.
Speaker 1:Uh , and they make too much money to qualify for any of the special stuff
Speaker 3:Gotcha .
Speaker 1:Special sauce that we have. Sure. Uh , the buyers are looking to buy another two family , or as we call them here in Wisconsin, duplexes, <laugh> in other parts. You know what insure Chicago ,
Speaker 3:They call
Speaker 1:Two flats. Oh ,
Speaker 3:Interesting. Anyway. Huh .
Speaker 1:Which is really the key of beef LA if you're a musician isn't
Speaker 3:Whoa.
Speaker 1:Alright . Digging out into my old music theory <laugh> . Anyway, so they're looking to buy a two family and they already own two duplexes.
Speaker 3:Oh, okay.
Speaker 1:And they live though this is good in one of the units. Oh.
Speaker 3:All .
Speaker 1:So they are occupying and they've been occupying that unit as their primary residence for like, at least three years.
Speaker 3:Okay.
Speaker 1:So I think we're gonna be okay. 'cause what, just I could read your face. What went through your Yeah ,
Speaker 3:Well we have to prove that it passes the smell test of is this new place really gonna be your primary residence? Are you really gonna live in it? And you know, they can say, well yes, because we're currently living in a duplex Right . That it makes the argument stronger than if they were in a single family .
Speaker 1:Correct. It's not like they're living in a single family home now that's, it's
Speaker 3:Like, I wanna volunteer to go back to sharing a , a floor or a ceiling with a neighbor <laugh> . Correct. So I
Speaker 1:Think we're gonna be okay on that.
Speaker 3:Yeah.
Speaker 1:Uh , but it is important that we are able to categorize it as a primary residence.
Speaker 3:Yes. Especially with the new rules that came out.
Speaker 1:Okay. So talk a little bit about that. Okay.
Speaker 3:What's
Speaker 1:The difference? Well ,
Speaker 3:Uh , previously up until literally last week, unless you were qualifying for a special program like home Possible, which we've established that these folks make too much money for that to buy a duplex, even as a primary residence, you had to go at least 15% down one 5% down unless you wanted to go do F H A , which is still three and a half percent down. But there's a whole other set of issues why you might want to not wanna do that. But literally last week Fannie Mae came out and said, you know what, if it's gonna be your primary, we're gonna make a shift so that the minimum down payment is now 5% down on a two through four unit primary residence property. Which is huge. 'cause down payment is, that is genuinely the barrier I see the most for people looking to buy a multi-unit property. Um, so really, really big change, especially for these folks.
Speaker 1:But now have, as of last week and I have been distracted with other things , uh, has there been any announcement yet on what the pricing adjustments are gonna be for those lower down payments? No,
Speaker 3:We don't know what the, if there's gonna be an L L P A change or, alright ,
Speaker 1:So, so there's a little bit of mystery and let me just kind of decode that for a , for a minute. So Fannie Mee and Freddie Mac, the font of all low, well, formerly low, but now the best you can get still .
Speaker 3:Yeah. The best is still
Speaker 1:The lowest you can get. <laugh> 30 your fixed rate mortgage money, they, a long time ago, probably 10 years ago, kind of came out with a rubric or a matrix that determines what rate and closing costs can be offered to any particular home buyer or homeowner. Yeah .
Speaker 3:And the , the rate is, it's a combination of credit score and loan to value ratio, which
Speaker 1:Means, let's translate that, say it the other way down payment. Right,
Speaker 3:Right . So
Speaker 1:Credit score, the higher their credit score and the bigger the down payment, the better deal you get. Mm-hmm.
Speaker 3:<affirmative> .
Speaker 1:But some of the other factors are the occupancy type. The best is primary residence. Second best is a vacation home. And the least best or otherwise known as the worst is their rental property. <laugh> and then property type matters . Single family detached homes get the best deal. Yeah . Uh, condos are next best unless you can get to 25% down, in which case then they're the same as single family detached. Correct . And then duplexes are third best on that rung. Yeah .
Speaker 3:Uh , and
Speaker 1:Then finally three to four families , uh, three to four family units are the least best. And then you got your loan purpose, let's not forget about that. Mm-hmm.
Speaker 3:<affirmative>
Speaker 1:Purchases and regular refinances of just existing first mortgage balances. Those you get the most favorable rates. If you're taking cash out, then you get a worse rate. Yeah .
Speaker 3:Or
Speaker 1:Higher closing costs . And then we already talked about if you meet certain income , uh, maximums. In other words, if you, if you
Speaker 3:Make too much money
Speaker 1:Yeah. Or I'm gonna say it another way. If you make under 100% of the area median income , uh, you get a better deal. Oh . If you make 80% or less of the area median income, you get an even better deal.
Speaker 3:Yeah .
Speaker 1:So all those factors go into the answering the question, Hey, what's your rate today?
Speaker 3:Yeah. As I was , as a perfect, because all those things you just listed are why it's so funny when someone will call up and literally say, what's your rate? Yeah.
Speaker 1:Because
Speaker 3:It , it depends on so many different factors.
Speaker 1:Yeah, absolutely. Yeah.
Speaker 3:It's like, I can't give you just what , what's your rate? Okay. It's super low. I
Speaker 1:Can, but, and what , what I , you know, rather
Speaker 3:Than being it's not gonna be super accurate. Well,
Speaker 1:Exactly. It's all we we can do is say, well if you're putting 25% down on a , uh, you know, single family detached home Yeah . And you have seven 60 or higher qualifying credit score, then it would be this , your primary residence, it's gonna be this. So that's what I'm sure that's what you
Speaker 3:Do . There you go.
Speaker 1:But yeah, the real answer depends on all that stuff. Alright . So the other part of the question that, or the first part of the question came about as he had talked to a realtor friend of his who suggested and observed that, you know, what about a third of offers are cash offers now.
Speaker 3:Wow. A third. Okay. You
Speaker 1:Know , and then we can , we could corroborate that. Sure.
Speaker 3:Yeah . Maybe
Speaker 1:He's talking about for duplexes in this price range, which they're looking for to buy in around 250,000.
Speaker 3:Okay. Yeah. That's probably a pretty competitive price range. Yeah. Yep .
Speaker 1:And , and so he's saying, you know what his suggestion to the dad was, why don't you get your financial advisor dad to write a letter that says you have enough money in your investment account in order to make
Speaker 3:Pay cash
Speaker 1:Your Yeah. To make your daughter and son-in-law cash buyers. When we come back, we're gonna tell you why that's not the best idea. You are listening to the Academic Mortgage and Realty Show on Wisconsin's radio station. AM six 20 W T M J getting you into the home of your dreams. Here's more of the ACU Mortgage and Realty Show with Brian Wicker on W T M J . Welcome back to the Academic Mortgage and Realty Show. I'm Brian Wicker, the elder. And that's , uh, Tim Holdman over there. Son-in-law, the younger good morning , much
Speaker 3:Taller
Speaker 1:And more Hanssen son-in-law and senior loan consultant Tim Holdman. Alright . We're talking about this , uh, dad who is trying to help his daughter and son-in-law by their third duplex as a primary residence
Speaker 3:Building the real estate empire. That's
Speaker 1:Right. That's what they that's good for them. Yeah. And we think we can help 'em do that. The dad was , um, inquiring, Hey, is it legitimate for me to get a letter from my financial advisor saying I have enough money to , uh, help my son and daughter-in-law be cash buyers. And um, and by the way, that was predicated on, you don't wanna think about a third of people are cash buyers. Well, that may be true, but I just ran the numbers in the multiple listing service. And from September 1st through , uh, the end of last week , uh, only 10% of duplex purchases in Milwaukee County were , uh, for prices between two hundred and two seventy five were cash buyers. So there you go. A lot lower than a third. Um, uh, by the way, f h a , uh, was , uh, 20% of the buyers and , uh, a little over half, about 57% were regular Fannie Mae 30 or fixed rate. I bet
Speaker 3:You the ratio between Fannie and F H A is gonna skew more in favor of Fannie over the next couple months due to that , uh, proof new change their pricing . Yeah . Well , the change in the down payment requirement.
Speaker 1:Yeah. Yeah. In the down payment requirement , as long as the pricing goes along with it. Right.
Speaker 3:Because
Speaker 1:As it stands right now, folks, if you put less than 15% down , uh, it's murderous. You get
Speaker 3:Hammered. Yeah . You get
Speaker 1:The pricing is like ridiculous. That's
Speaker 3:A good point. Yeah.
Speaker 1:So we gotta have both things . Right .
Speaker 3:More updates to come on that . But
Speaker 1:Back to this idea of using a appearance . I have seen that work. Yeah, absolutely. Alright . But it's really not in line with the terms of the Wisconsin offer to purchase mm-hmm . <affirmative> , which say that if there's a cash offer, then the buyer, which in this case would be the daughter and son-in-law
Speaker 3:Right .
Speaker 1:Have to show that they, the buyers have enough cash to not need a mortgage. Right.
Speaker 3:And it's not their money, it's their parents. So ,
Speaker 1:And the dad is not a party to the contract. Right. So I told them , I said, if I was the seller or if I was the seller's listing agent, I would say, nice try <laugh>. But unless you wanna
Speaker 3:This isn't the cash offer. Yeah.
Speaker 1:Unless you wanna put dad o on the offer as one of the owners. Right. It's
Speaker 3:One of the buyers
Speaker 1:I'm sure they probably don't wanna do. So here's what I suggested. I said, here's almost as good. 'cause what is it , what do sellers enjoy when it's a cash buyer? It means that
Speaker 3:No contingencies. That's right. Yeah .
Speaker 1:They're , they can't be told no, the buyer can't scuttle the deal based on Yeah . Or they financing. They don't
Speaker 3:Have to worry about changing the purchase price due to a low appraisal. They don't have to worry about financing.
Speaker 1:Well, only if that cash buyer also doesn't ask for an appraisal,
Speaker 3:I suppose could be a cash buyer with an appraisal contingency.
Speaker 1:That's right . That's true . But , you know, I think that's the general thinking as I'm a cash buyer. So I said, I told 'em this story, and this is in one of the ads that are airing right now , uh, that just started on last Friday. We had a past customer looking for us to help 'em buy their retirement condo. Uh, and they wanted to put , uh, 50% down.
Speaker 3:So they're already way bigger down payment than most folks.
Speaker 1:Correct. And so then we put the rock solid preapproval letter with that we did not get the appraisal waiver mm-hmm . <affirmative>
Speaker 3:And this
Speaker 1:Particular case, but they wrote without an appraisal contingency anyway. Yeah . Of course
Speaker 3:The risk is super minimal to them . And ,
Speaker 1:And so, you know, the seller asked in that case, Hey, because apparently we're guessing they were the highest offer.
Speaker 3:Okay.
Speaker 1:Hey, can I, can I take this one with the 50% down and the preapproval letter for mac net ? And , and the listing agent said, absolutely beautiful.
Speaker 3:You know,
Speaker 1:It's, and so we actually beat out a cash offer.
Speaker 3:It's just next best thing to a cash offer. Yeah . <laugh> .
Speaker 1:And so my, my point to the dad was, well, why don't we do this up where we will have you show us that you have the money mm-hmm .
Speaker 3:<affirmative> that
Speaker 1:You could give a gift Yeah .
Speaker 3:Of a hundred
Speaker 1:Thousand dollars. Right . Big
Speaker 3:Down payment.
Speaker 1:Big down
Speaker 3:Payment .
Speaker 1:And then instead of writing the preapproval letter with 15% down, we'll write it with 50% down because, and you're gonna sign a gift letter saying you're willing to give the gift. Yeah .
Speaker 3:Now
Speaker 1:In
Speaker 3:The if if necessary. Yeah .
Speaker 1:If necessary, in the end, they're really only gonna put 15% down. Correct.
Speaker 3:Right.
Speaker 1:Uh , maybe less under the new guidelines. And ,
Speaker 3:And by the way, folks, that happens all the time. Uh, where if we show a , a borrower could put more down, they can always choose not to. Once the the offer is accepted, the seller doesn't care how much money comes from the buyer and how much money comes from the lender. It's all gonna add up to the same dollar amount for them at the end of the day. And I
Speaker 1:Always like to point out, this is exactly the same as the cash offer terms. Uh, if you write a cash offer in Wisconsin, you have to prove that you have the money. Right . But pre-baked into the language of the Wisconsin offer to purchase WB 11 form, it says this , the buyer can still go out and get a mortgage and the seller will grant access mm-hmm . <affirmative> to the lender's appraiser. Correct. Okay. So extending that, Hey, I'm going from putting a hundred percent down to maybe I'm only gonna put 20% down, but I proved to you I could be a cash buyer. We're taking that and saying, Hey, you know what, we're gonna pre-approve you for 50% down 'cause we've documented the assets Yep .
Speaker 3:Coming from
Speaker 1:Dad in the form of a gift. Uh, but they might choose to put 15% down. Absolutely. So he really liked that idea as a much
Speaker 3:Better execution of the game plan. Oh , okay . Yeah .
Speaker 1:Yeah. A a more , uh, inside the box, you're not gonna get anybody , uh, uh, objecting to that game plan.
Speaker 3:No. Yeah. It's in line with the contract, the WB 11 . It just actually fits more into that template.
Speaker 1:The other thing, we're gonna get to one of your stories when we come back, but the other thing I want to just talk, talk about after we're , uh, back from the news is his question about this no appraisal required idea. Okay. We'll get to that. But right now it's time to turn it over to the 24 hour newsroom. Don't break the fact to get into a house, back to the ACU and Mortgage and Realty Show with Brian Wicker on W T M J . Welcome back to the Academic Mortgage and Realty Show. And , uh, we were talking Tim, about a dad that had called in or just covered how we were gonna come up with a better way to help them compete , uh, for a duplex that they wanna buy. Mm-hmm. <affirmative>. And uh, the other thing that came up though, and I brought this up, I said, you know, you may have heard some of our ads. The other thing we're doing now are is what I call a property specific pre-approval. Where as the home buyer, home shopper's about to write the offer, we have 'em call us, text their loan consultant, and then we put that specific property address into the automated underwriting systems that we have access to. And then in a lot of cases the answer comes back, Hey, we believe the value you just put in sometimes the computer, which is all about big data mm-hmm. <affirmative>
Speaker 3:And
Speaker 1:Complicated statistical analysis. Sometimes it comes back and says, I even believe a , a , uh, a value over the asking price. Yeah.
Speaker 3:And
Speaker 1:That's one of the ads that I have running right now where the , um, asking price I think was about four 10 . And they called up their loan consultant, we put it through at 30 grand over asking.
Speaker 3:Okay.
Speaker 1:And it said, I believe that guy ,
Speaker 3:We believe you. We believe s worth four 40 .
Speaker 1:That's right. Four 40. So, because his dad was saying like, why would I wanna do that? That that sounds risk , why would I want to go without an appraisal over asking? That sounds crazy. But once I explained that, we're running it through a really sophisticated model that looks at all the data, it knows this house, it's looking at all the comparables and it's saying , you know what? We believe the value you're telling us. 'cause it doesn't know the model doesn't know the listing price,
Speaker 3:Remember. No , exactly. David
Speaker 1:Loves to say this. The listing price is a made up number.
Speaker 3:<laugh> . It is .
Speaker 1:And , and so this is statistically looking at everything and saying, oh, we believe in this particular case, four 40. Now the market is going into what I'm calling its fall cool off For sure. And in September, David and I reported last week, only air quotes 55% of , uh, homes in the five county Milwaukee metro area sold for over asking that's down from 59% the month before and 65% , uh, earlier. Okay.
Speaker 3:In
Speaker 1:The summer. Yeah.
Speaker 3:So a little bit of a cool off.
Speaker 1:Yeah. And again, air quotes, only 36% of homes sold for 10 grand or more over asking Sure .
Speaker 3:So ,
Speaker 1:You know, it's, it's getting less competitive. So , so the answer is we're not ,
Speaker 3:Um,
Speaker 1:Making things up. It , it is based in fact, and the whole reason why the buyer then feels great. It's like, Hey , maybe I'm probably not over overpaying. I have a statistical model that says it believes it's value. Yeah .
Speaker 3:The , the market supports this value. Yeah .
Speaker 1:And then the really good thing for the seller is it makes that pre-approval that says no appraisal required mm-hmm . <affirmative> of equal wonderfulness
Speaker 3:Yeah.
Speaker 1:Compared to a cash offer where they're saying, I don't care . Right .
Speaker 3:'cause there's no risk of them having to go back and reduce the purchase price to match a low appraisal. That's
Speaker 1:Right . 'cause we're not gonna get one. So you got it . Right . So what do you got over there, Mr. Frontline, prolific senior loan consultant's originating machine. That's
Speaker 3:A lot of pressure. No , uh, I've got, actually this was a, a daughter and son-in-law of a financial advisor that we both know who, who sent his daughter in. And , uh, first time, she's a first time home buyer . He is not. But , um, they, you know, hadn't bought a home in a long time, so they were thinking, okay, we, we just saw a house, we love it, we wanna make an offer. Oh , shoot, we're not pre-approved at all. So jumped on the phone with the kids and , and dad , uh, right away and did a , a whole , um, mortgage pastoring session. But one of the things we touched on was , uh, what we were just talking about, our ability to write a property specific appraisal , uh, that maybe can pre-approval,
Speaker 1:I'm
Speaker 3:Sorry, pre-approval
Speaker 1:With no appraisal required. Yes .
Speaker 3:Thank you. Property specific pre-approval , uh, showing no appraisal required. So I got on the phone with the realtor, chatted with her , uh, they actually decided ultimately not to make an offer on that house, but as I was getting my work ready and , and going through the pre-approval, we determined that we were not able to waive the appraisal. Right. Based on, and you know, sometimes that's the answer, but it's still worth looking. And that realtor is going to text me the address of every house that they're even thinking of writing an offer on. Yeah . So I can check because it just makes the , uh, the offer so much more appealing to the seller and that that's still the name of the game. Even though the market is cooling off, I spend the most time with my customers, not pre-approving them. That's the easy part, but it's consulting. Okay. How do we make sure that you can win once you find a house that you wanna buy? And that's all this extra stuff that you may not get and, and probably are not getting from every loan consultant you would talk to out there in the world. This is truly something I think that academic consultants are a little bit better at.
Speaker 1:No, we're way better. All
Speaker 3:Right . I'm trying to
Speaker 1:Be biased . You're sure you're short selling yourself. Yeah. We're way better, better at helping people understand what they can do. Like, oh, let's get a gift letter and verify that mom and dad can provide additional money for down payment. Sure . Because folks in the eyes of the seller, more down payment is better. It equals greater certainty.
Speaker 3:You reminded me of something else that, and we will talk about this in the next segment, but on , uh, on the same vein as gifts, you can do actually a gift of equity, ah , between buyer and seller if they are related either by blood or by marriage. And , um, I came across a , a situation this past week with a client of mine who is buying a , a , a condo from his cousin, and we're going the gift of equity route, but they were not aware of, of something called the annual gift tax exemption versus the lifetime gift tax exclusion amount. So we can talk about that after the break .
Speaker 1:Let's cover that. That's always a good topic to refresh our memories on. You are listening to the Acade Mortgage and Realty Show on six 20 W T M J, important home buying questions and answers you can count on. This is the Accu Mortgage and Realty Show with Brian Wickett on W T M J . Welcome back and thanks for tuning in to the Academic Mortgage and Realty Show. I'm Brian Wicker, the elder, and , uh, that is Tim Holdman son-in-law. Tim Holdman , uh, father of grandchildren number one and two. There
Speaker 3:You go. Yep .
Speaker 1:Yep .
Speaker 3:First place, David first
Speaker 1:Place. That's right. So number one. And , uh, also taller and more handsome than me by a long shot. Okay. So , uh, before we talk about the excellent topic of misunderstanding, the gift rules Yes. Relative to the I r s that come into play sometimes with home buying. The other thing that came out recently was the monthly Fannie Mae , uh, home buyer sentiment index and or home purchase, technically home purchase sentiment index. Um, which decreased month over month. And , uh, not surprisingly, only 16% of consumers in this survey of a thousand households said that it's a good time to buy a home.
Speaker 3:Yeah. That
Speaker 1:Doesn't surprise you today .
Speaker 3:No, not at all.
Speaker 1:That , uh, matches an all time survey low , uh, set Last year , uh, by the way, 63% of those people in the survey said it was a good time to sell. That's down three points from the prior month.
Speaker 3:Hmm .
Speaker 1:Interesting. Um, so , so the reason why I go yay , is that that makes it easier for our motivated home shopper. Yeah . That means there's probably a little less competition. Exactly.
Speaker 3:And now
Speaker 1:Remember, all real estate is local. So when you see, you know, headlines or news stories that report home prices tumbling and you know, things really bad, that's really not the case here in southeastern Wisconsin. In particular, the Badger State in general. Last week, Tim, we talked about how I think the , uh, average days on market in the city of Chicago was like 56 days.
Speaker 3:Wow. Yeah.
Speaker 1:Whereas in the five county Milwaukee area, I think it's still around 30 . Yeah.
Speaker 3:Makes sense. Yeah.
Speaker 1:So what are , what are you seeing on, on the front lines relative to that competitiveness before we get to the Yeah,
Speaker 3:I mean honestly it's, I'm , I still got a lot of people who want to talk to me about buying a house. Okay.
Speaker 1:You
Speaker 3:Know , uh, and, and part of that is just staying organized and staying in , in front of people and following up with them. But I am not lacking for people to talk to. Okay . So ,
Speaker 1:So we're seeing buyers, plenty of buyers,
Speaker 3:Yeah. Which
Speaker 1:Is good. But, you know, maybe are , are you finding that the people who are getting accepted offers like this last week, are they still in competitive situations from what you can tell?
Speaker 3:Yeah. I mean, a couple more for sale by owner . So that's not , uh, you know , uh, a
Speaker 1:Little less ravenous in the competition.
Speaker 3:Exactly. And I have , I still have people who are trying to work that out. They're , they're searching out that situation by talking to neighbors, friends, family. Okay .
Speaker 1:Uh ,
Speaker 3:Those kinds of things
Speaker 1:Go on Facebook
Speaker 3:For people who are kind of doing it the normal way of getting a real estate agent and going out and looking. Uh, yeah. There's still some competition, but I, I , you know, my customer's experience I think is reflecting the data that you and David went over last week , which is, you know, if you're offering over, it may not be as much over and statistically I'm seeing maybe just a little bit of a downturn in , in how many transactions I'm doing where that's, you know, above the, the list price . Okay .
Speaker 1:You know ,
Speaker 3:Some , sometimes even for decent properties offering the asking is,
Speaker 1:Is sufficient
Speaker 3:Starting to be good enough again? Yeah .
Speaker 1:Okay. So the message, the takeaway there folks is, hey, as we get deeper into fall, now is a great time to buy Yeah.
Speaker 3:If , right , because there's wanna buy competition. Yeah. We , we can help you . And
Speaker 1:Remember, refinancing is really inexpensive in Wisconsin. We even always offer a no cost , uh, plan . Correct . Alright , so let's talk about gifting. You got somebody, you said it was a cousin selling to another cousin mm-hmm. <affirmative> . And what's the fundamental misunderstanding here?
Speaker 3:So it is in incredible , uh, so , well , I'll just say this first in at least half of the scenarios where a gift is involved, particularly a large gift, I get the question like, oh, isn't there a limit on how much I can give to my family member? Again, not every time that question is asked, but about half the time that question comes up. Sure . And it's incredible how , uh, rampant the understanding is that I can't give my family member more than 17, $17,000 in a year. And the reason some people believe that is because there is such a thing called the annual gift tax exclusion. You can go look this up on nerd i r s . Yeah. Nerd Wall or I r s anything IRSs
Speaker 1:T gov ,
Speaker 3:Where essentially, if I were to put this in , uh, plain speak, if you give less than $17,000 in a year to a family member, it's as if it never happened. And
Speaker 1:It could be to anybody by the way. Oh,
Speaker 3:Okay . Sure . It doesn't have to be a family member,
Speaker 1:It's just for mortgage lending purposes. The only gifts that are legit for down payment or equity are from family members. But yeah .
Speaker 3:So it's, it's the maximum in a year that you can give to a person without reporting it to the I r s . Right. You don't have to do anything. But what happens if you have to give more than $17,000 to a person in a single year, nothing bad actually happens. All you have to do is that you do have to report it to the I R Ss and it counts against something called the lifetime Gift tax exclu , uh, exemption, lifetime gift tax exemption. Where as long as you give under that lifetime amount, you are not gonna be tax .
Speaker 1:Oh , see , man , what is that lifetime amount? It's like a hundred thousand or how big is it?
Speaker 3:It is a whopping $12.92 million. So what that means is, if over the course of your life you think you'll probably give less than that,
Speaker 1:You don't have to worry about it. Right.
Speaker 3:So that, that's the only difference. If you give more than 17 K , you have to fill out a form as part of your tax returns and tell uncle you gave the money. Wait,
Speaker 1:Do the other variation where, you know, which is very common, where it's , uh, grandma and grandpa are selling to their grandchildren mm-hmm.
Speaker 3:<affirmative>
Speaker 1:And what's the situation there? Yeah.
Speaker 3:Well, you can just parcel it up if you really want to not have to worry about this come tax time, do 17 k from grandma to grandson, 17 K from grandma to granddaughter, 17 K from grandpa to grandson, and 17 K from
Speaker 1:Grandpa
Speaker 3:To granddaughter. Right. So ,
Speaker 1:So you can do four times the 17 where you're got 60,000 .
Speaker 3:Yeah . But in , in , in my case, it was a single party to a single party. They were cousins and the gift of equity amount was more than 17,000. And the, the attorney advising both of them actually was not aware of the difference between
Speaker 1:Yikes. The lifetime . Well , because
Speaker 3:Know ,
Speaker 1:They're not accountants, they're attorneys. Right. I've got one other thought to share on transactions between family member sales of family properties . Okay. And then , um, also want to talk about your client who we're gonna help by reducing their qualifying income. What
Speaker 3:Tell
Speaker 1:You about that when we come back? You are listening to the ANet Mortgage and Realty Show on Wisconsin's radio station AM six 20 W T M J . Find a place to call home
Speaker 4:Without the headache.
Speaker 1:This is the ACU Net Mortgage and Realty Show with Brian Wicker
Speaker 4:On W T M J.
Speaker 1:Thanks again for tuning into today's show. Uh , Tim, while we're on break here, you were thinking what I was thinking, or this actually came up, what's the other wrinkle , uh, that we often give advice on? Yeah . When a family member is selling a property to another family member,
Speaker 3:So usually common sense they think, oh, well I'm gonna cut my family member a deal and sell it, sell the property to them for less than it's worth. You don't actually want to do that. What you wanna do is you want to set the purchase price at whatever the most is you think you can get for the property in, in fair market value, but then just increase your gift of equity amount to them to cut them a deal that way. Because ,
Speaker 1:Because then maybe you're gonna gift them 20% equity and you're not gonna pay p m i . Yes.
Speaker 3:Whereas
Speaker 1:If you skinny up the price Right, and then the person only has 10 grand to bring to the table or no grand, you know, that that becomes Yeah.
Speaker 3:On the lending side, it , it's , uh, it , it actually makes them look less desirable as a borrower and help and, you know, makes 'em maybe get a less desirable by setting the price higher with a larger gift of equity, you're stirring them out with a greater equity position, which from the lending side makes them a more attractive borrower of money.
Speaker 1:Just another point , uh, if , if Cousin Paul, the tax accountant was on, if you set the price artificially low, that can technically be considered a gift <laugh> when you sell something to another relative at
Speaker 3:Under fair
Speaker 1:Market value. Now that's harder to prove. Yeah.
Speaker 3:Right.
Speaker 1:But technically the same problem. Alright . What's our , our , uh, last uh ,
Speaker 3:Topic? So just another unique story from the front lines of mortgage lending. I had a , a call who called in just to our , our main line and said, Hey, I'm buying a house with my friend. We're both gonna live there and I'm not really happy with my rate. I'm getting quoted like eight and a quarter on a 30 year fix . And I was like, hold on. I know rates are high, but that seems a little too high. So we dug into the details and turns out the other lender was offering him not a Fannie Mae backed mortgage, but a portfolio loan because that was the only product that that other lender at that other company was recommending. 'cause this guy's friend was self-employed
Speaker 1:Ah .
Speaker 3:And on paper made no money for his business 'cause he was writing everything off. 'cause that's what you do when you're a small business . That's
Speaker 1:Right . Owner .
Speaker 3:So they , uh, were going forward with a portfolio product , uh, where they were using the guys' bank statements as income, which we actually have a program like that that we could tap into as needed. But the rate is really
Speaker 1:Right. Unfavorable
Speaker 3:Closing cost higher too, probably. Yeah.
Speaker 1:Never got to that part . Yeah. We
Speaker 3:Never even got to closing cost . But, you know, the , the rate, and it was a fairly decent sized loan, so even a 1% difference I think was gonna save him about 230 bucks a month. Whoa . Real money. And we looked into it further and he, the , the guy who called in W two salaried employee, I did a , you know, a , a number crunch on the , uh, and I didn't access his credit, this was more informal, but , uh, we looked at his monthly payments , uh, for his debts that are show up on his credit report, the monthly payment of the house. And I realized, hey, you can actually qualify for this all on your own Right.
Speaker 1:On
Speaker 3:A 30 year fixed Fannie Mae mortgage where the rate is at least a full percentage point lower than, than what he was currently getting. And I said, you can still have your friend as a buyer on title and you know, he's just not gonna be on the mortgage.
Speaker 1:Right.
Speaker 3:So as long as you're okay with that, you know, risk to you, 'cause you know, ultimately you kind of have to have a handshake agreement with him. He's gonna still help you out with the , the payment. But
Speaker 1:Well , the
Speaker 3:Savings are , are huge,
Speaker 1:Substantial. And , and sometimes when you're buying with the person who is not your legal spouse, whether it's a friend or a domestic partner or whatever, it is best to come up with a written agreement in advance because Right . Uh, there is no legal process to untangle that the person wants to move out or, or sell the property or what have you. Right. You know, whenever you're buying with somebody else, there's oftentimes a mix of down payment. Hey, who's bringing the down payment to the party? Exactly. Or maybe one person is bringing more than the other. Right.
Speaker 3:Right.
Speaker 1:And then the other thing is paying back, making the monthly mortgage payments. So mm-hmm.
Speaker 3:<affirmative> ,
Speaker 1:You know, that's best to have a written agreement. Yeah.
Speaker 3:Uh ,
Speaker 1:Before you close. All right .
Speaker 3:So he was thrilled by the, the alternate game plan and , uh, I love giving second opinions. Yeah. And I think all of us at ANet do . So call us if you , uh, have doubts about your current game plan .
Speaker 1:That's right. Alright , well that's all the time we have for today, folks. Thanks for tuning in. You've been listening to the acade Mortgage and Realty Show on AM six 20 W T M J . The proceeding was a paid program. Advice and opinions expressed during the Accu Mortgage and Realty Show are solely that of the host or guests of academic mortgage and academic Realty advisors and not W T M J Radio or Good Karma Brands. Milwaukee, L L C.